The problem requires you to use File C03 on the computer problem spreadsheet. Diction Publishing estimates that it needs $500,000 to support its expected growth. The underwriting fees charged by the investment banking firm for which you work are 6.5% for such issue sizes. In addition, it is estimated that Diction will incur $4,900 in other expenses related to the IPO. If your analysis indicates that Diction's stock can be sold for $40 per share, how many shares must be issued to net the company the $500,000 it needs? b. Suppose that Diction's investment banker charges 10% rather than 6.5%. Assuming that all other information given earlier is the same, how many shares must Diction issue in this situation to net the company the $500,000 it needs? C. Suppose that Diction's investment banker charges 8.2% rather than 6.5%. Assuming that all other information given earlier is the same, how many shares

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Computer-Related Problem
The problem requires you to use File C03 on the computer problem spreadsheet. Diction
Publishing estimates that it needs $500,000 to support its expected growth. The underwriting
fees charged by the investment banking firm for which you work are 6.5% for such issue sizes.
In addition, it is estimated that Diction will incur $4,900 in other expenses related to the IPO.
If your analysis indicates that Diction's stock can be sold for $40 per share,
how many shares must be issued to net the company the $500,000 it needs?
b. Suppose that Diction's investment banker charges 10% rather than 6.5%.
Assuming that all other information given earlier is the same, how many
shares must Diction issue in this situation to net the company the $500,000
a.
it needs?
Suppose that Diction's investment banker charges 8.2% rather than 6.5%.
Assuming that all other information given earlier is the same, how many shares
must Diction issue in this situation to net the company the $500,000 it needs?
d. Suppose everything is the same as originally presented, except Diction will
incur $5,835 in other expenses rather than $4,900. In this situation, how
many shares must Diction issue to net the company the $500,000 it needs?
Now suppose that Diction decides it only needs $450,000 to support its
growth. In this case, its investment banker charges 7% flotation costs, and
Diction will incur only $3,840 in other expense. How many shares must Dic-
tion issue to net the company the $450,000 it needs?
C₁
e.
f.
Suppose the scenario presented in part (e) exists, except the price of Diction's
stock is $32 per share. How many shares must Diction issue to net the com-
pany the $450,000 it needs?
Transcribed Image Text:Computer-Related Problem The problem requires you to use File C03 on the computer problem spreadsheet. Diction Publishing estimates that it needs $500,000 to support its expected growth. The underwriting fees charged by the investment banking firm for which you work are 6.5% for such issue sizes. In addition, it is estimated that Diction will incur $4,900 in other expenses related to the IPO. If your analysis indicates that Diction's stock can be sold for $40 per share, how many shares must be issued to net the company the $500,000 it needs? b. Suppose that Diction's investment banker charges 10% rather than 6.5%. Assuming that all other information given earlier is the same, how many shares must Diction issue in this situation to net the company the $500,000 a. it needs? Suppose that Diction's investment banker charges 8.2% rather than 6.5%. Assuming that all other information given earlier is the same, how many shares must Diction issue in this situation to net the company the $500,000 it needs? d. Suppose everything is the same as originally presented, except Diction will incur $5,835 in other expenses rather than $4,900. In this situation, how many shares must Diction issue to net the company the $500,000 it needs? Now suppose that Diction decides it only needs $450,000 to support its growth. In this case, its investment banker charges 7% flotation costs, and Diction will incur only $3,840 in other expense. How many shares must Dic- tion issue to net the company the $450,000 it needs? C₁ e. f. Suppose the scenario presented in part (e) exists, except the price of Diction's stock is $32 per share. How many shares must Diction issue to net the com- pany the $450,000 it needs?
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