Zoom Delivery Ltd, an online parcel delivery service is expanding rapidly after the pandemic caused by Covid-19. It is planning to raise $35 million (this is the net amount required) to finance its business expansion. The offer price is $20 per share to the public and the underwriter charges 7% spread with a standby underwriting arrangement. a)How many shares does the company have to issue to achieve its capital raising goal? b)Assume that the issue becomes unsuccessful, as they only receive 95% subscriptions of the total number of shares offered. What would be the total proceeds and how much would the company and the underwriter receive respectively?
Zoom Delivery Ltd, an online parcel delivery service is expanding rapidly after the pandemic caused by Covid-19. It is planning to raise $35 million (this is the net amount required) to finance its business expansion. The offer price is $20 per share to the public and the underwriter charges 7% spread with a standby underwriting arrangement.
a)How many shares does the company have to issue to achieve its capital raising goal?
b)Assume that the issue becomes unsuccessful, as they only receive 95% subscriptions of the total number of shares offered. What would be the total proceeds and how much would the company and the underwriter receive respectively?
A share of a stock is a financial security issued by a corporation to raise capital funds from the general public. The company shall be required to issue its share in a primary market through an underwriter.
The underwriting agreement is a financial arrangement in which the underwriter takes on the financial risk associated with a security issue. The underwriter shall be paid an underwriting fee as a percentage of the gross amount to be raised through an issue.
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