Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 6CRCT
Summary Introduction
To determine: How Person X’s thinking would affect when he comes to know certain facts of the firm.
Introduction:
The private companies offer their stock for the first time to the public and this offering is termed as the initial public offerings. The private company that wants to become a publicly traded company usually offers the initial public offerings.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
On April 27, 2018, DocuSign, a California company that provides technology to enable digital signatures on important documents, conducted its initial public offering (IPO) of common stock. In the primary market the company’s shares were priced at $29 per share, but after one day of trading on the Nasdaq, the share price closed at $39.73. The company sold 21.7 million shares in the offering.
To what extent (in dollars and on a percentage basis) was DocuSign’s stock underpriced in its IPO?
How much cash (before deducting fees to investment banks) did DocuSign raise? How much more would it have raised if the shares had not been underpriced?
On April 27, 2018, DocuSign, a California company that
provides technology to enable digital signatures on important
documents, conducted its initial public offering (IPO) of
common stock. In the primary market the company's shares
were priced at $29 per share, but after one day of trading on the
Nasdaq, the share price closed at $39.73. The company sold 21.7
million shares int the offering.
a. To what extent (in dollars and on a percentage basis) was
DocuSign's stock underpriced in its IPO?
b. How much cash (before deducting fees to investment
banks) did DocuSign raise? How much more would it have
raised if the shares had not been underpriced?
On August 19, 2004, Google completed its IPO of 18.5 million shares to the initial investors at $80 per share. The closing price of the stock that same day was $100.00. What was the dollar value of the underpricing associated with the Google IPO? (Round answer to 0 decimal places, e.g. 5,275.)
Chapter 15 Solutions
Fundamentals of Corporate Finance
Ch. 15.1 - Prob. 15.1ACQCh. 15.1 - Prob. 15.1BCQCh. 15.2 - What are the basic procedures in selling a new...Ch. 15.2 - What is a registration statement?Ch. 15.3 - Prob. 15.3ACQCh. 15.3 - Why is an initial public offering necessarily a...Ch. 15.4 - Prob. 15.4ACQCh. 15.4 - Prob. 15.4BCQCh. 15.5 - Prob. 15.5ACQCh. 15.5 - Suppose a stockbroker calls you up out of the blue...
Ch. 15.6 - What are some possible reasons why the price of...Ch. 15.6 - Explain why we might expect a firm with a positive...Ch. 15.7 - What are the different costs associated with...Ch. 15.7 - What lessons do we learn from studying issue...Ch. 15.8 - Prob. 15.8ACQCh. 15.8 - What questions must financial managers answer in a...Ch. 15.8 - Prob. 15.8CCQCh. 15.8 - When does a rights offering affect the value of a...Ch. 15.8 - Prob. 15.8ECQCh. 15.9 - What are the different kinds of dilution?Ch. 15.9 - Is dilution important?Ch. 15.10 - What is the difference between private and public...Ch. 15.10 - Prob. 15.10BCQCh. 15.11 - What is shelf registration?Ch. 15.11 - Prob. 15.11BCQCh. 15 - Prob. 15.1CTFCh. 15 - Smythe Enterprises is issuing securities under...Ch. 15 - Prob. 15.4CTFCh. 15 - Prob. 15.7CTFCh. 15 - Debt versus Equity Offering Size [LO2] In the...Ch. 15 - Debt versus Equity Flotation Costs [LO2] Why are...Ch. 15 - Bond Ratings and Flotation Costs [LO2] Why do...Ch. 15 - Underpricing in Debt Offerings [LO2] Why is...Ch. 15 - Prob. 5CRCTCh. 15 - Prob. 6CRCTCh. 15 - Prob. 7CRCTCh. 15 - Prob. 8CRCTCh. 15 - Prob. 9CRCTCh. 15 - Prob. 10CRCTCh. 15 - Prob. 1QPCh. 15 - Prob. 2QPCh. 15 - Rights [LO4] Red Shoe Co. has concluded that...Ch. 15 - Prob. 4QPCh. 15 - Calculating Flotation Costs [LO3] The Valhalla...Ch. 15 - Prob. 6QPCh. 15 - Prob. 7QPCh. 15 - Prob. 8QPCh. 15 - Dilution [LO3] Eaton, Inc., wishes to expand its...Ch. 15 - Prob. 10QPCh. 15 - Dilution [LO3] In the previous problem, what would...Ch. 15 - Prob. 12QPCh. 15 - Value of a Right [LO4] Show that the value of a...Ch. 15 - Prob. 14QPCh. 15 - Prob. 15QPCh. 15 - Prob. 1MCh. 15 - Prob. 2MCh. 15 - Prob. 3MCh. 15 - Prob. 4M
Knowledge Booster
Similar questions
- In 2016, Poe's Products completed the treasury stock transactions described below. January 2: Reacquired 10 million shares at $16 per share. February 15: Sold 3 million shares at $20 per share. September 20: Sold 3 million treasury shares at $15 per share. Poe had issued 50 million shares of its $1 par common stock for $18 several years ago. Required: Record the above transactions, assuming that Poe's Products uses the cost method.arrow_forwardOn November 7, 2013, Twitter released its initial public offering (IPO) priced at $26 per share. When the day ended, it was priced at $44.90, reportedly making about 1600 people into millionaires in a single day.[20] At the time it was considered a successful IPO. Four years later, Twitter is trading at around $18 per share. Why do you think that occurred? Is Twitter profitable? How can you find out?arrow_forwardIn the 3-month period November 1, 2014, through January 31, 2015, Hess Corp. (HES) stock decreased from $80 to $64 per share, and Exxon Mobil (XOM) stock decreased from $96 to $80 per share. If you invested a total of $23,680 in these stocks at the beginning of November and sold them for $19,360 3 months later, how many shares of each stock did you buy? Hess Corp. (HES) stock Exxon Mobil (XOM) stock shares shares Need Help? Read it Master It Submit Answer 25. [-12 Points] DETAILS MY NOTES WANEFM7 3.1.058. PRACTICE ANOTHER ASK YOUR TEACHER Purchasing Earl is ordering supplies. Yellow paper costs $4.00 per ream while white paper costs $7.50 per ream. He would like to order 100 reams total, and has a budget of $526. How many reams of each color should he order? yellow paper white paper Need Help? Read it Submit Answer reams reams 26. -/1 Points] DETAILS MY NOTES WANEFM7 3.1.027. ASK YOUR TEACHER PRACTICE ANOTHER Use technology to obtain approximate solutions graphically. All solutions…arrow_forward
- Sakura Co. was established on January 1, 2011. On January 1, 2011, Sakura issued 100, 000 common shares for $500,000. The par value of each share is $1. On July 15, Sakura purchased back 2,000 of its own common shares at $6 each. On December 31, 2011, the stock market price of Sakura's common shares was $9 each. What is the balance of Sakura's common stock account on Dec 31, 2011?arrow_forwardCell Services Inc. (CSI) had 1,000,000 average shares outstanding during all of 2009. During 2009, CSI also had 10,000 options outstanding with exercise prices of $10 each. Th e average stock price of CSI during 2009 was $15. For purposes of computing diluted earnings per share, how many shares would be used in the denominator? B . 1,006,667.arrow_forwardPlease see below. I really need help with this asap. Please include relevant terms and dates as needed.arrow_forward
- Cambridge Corp. has a single class of shares. As its year ended December 31, 2015, the company had 2,500,000 shares issued and outstanding. On the stock exchange, these shares are trading for $10 per share. In the company's accounts, these shares had a value of $30,000,000. The equity accounts also show $450,000 of contributed surplus from previous repurchases of shares. On January 15, 2016, Cambridge repurchased and cancelled 100,000 shares at a cost of $10 per share. Later in the year, on August 20, the company repurchased and cancelled a further 300,000 shares at $15 per share. Record the journal entries for August 20, 2016 under ASPE. Please round your final answer to the nearest dollar. Do not round intermediary answers. Do not use $ signs in your final answer. Enter $0 for any journal entries that do not apply. DR. Common shares - Type your answer here DR. Cash- Type your answer here DR. Contributed surplus - Type your answer here DR. Retained earnings - CR. Common shares - F12…arrow_forwardCool Company has decided to take their company public on January 1, 2014. Cool company had 1,000 shares authorized. The following transactions occurred. a.) Jean grey issues 5,000 shares for $15 per share during their IPO on January 1, 2014. each share has a par value of $5. Record the journal entry for this transaction. Please label debits and credits and include classification of each account. b.) On January 1, 2015, Cool company bought back 2,000 shares from the open market at a price of $25 per share. Record the journal entry for this share repurchase. Label debits and credits and include classification of each account.arrow_forwardGoogle sold its shares to the public on Aug 19,2005. The offer price was $74 per share and Google sold 28,406,064 shares. At the close of the first day of trading Google’s share price was $90.43. Money left on the table in Google’s IPO is ?arrow_forward
- On October 1, 1970, Walmart first offered 300,000 shares of its common stock to the public at a price of $16.50 per share. Since that time, Walmart has had 11 two-for-one stock splits. So if you pur chased 100 shares in 1970, you would have 204,800 shares as of September 30, 2014. The closing price of the stock on that day was $77.50. What is the com pound growth of the Walmart stock over 44 years?arrow_forwardPlease send me the solution thanksarrow_forwardUse the information for the question(s) below. In November 2009, Perrigo Co. (PRGO) had a share price of $39.20. They had 91.33 million shares outstanding, a market-to-book ratio of 3.76. In addition, PRGO had $845.01 million in outstanding debt, $163.82 million in net income, and cash of $257.09 million. Perrigo's book value of equity is closest to: A) $952.16 million B) $3,580.14 million C) $4,168.06 million D) $4,425.15 millionarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College