33.
Calculating Costs of Issuing Stock Paige’s Purses, Inc., needs to raise $25 million to
finance plant expansion. In discussions with its investment bank, Paige’s Purses learns
that the bankers recommend an offer price (or gross proceeds) of $50 per share and
Paige’s Purses will receive $45 per share. What is the underwriter’s spread on the issue?
34.
Calculating Costs of Issuing Stock Amy’s Accessories, Inc., needs to raise $10 million to
finance plant expansion. In discussions with its investment bank, Amy’s Accessories learns
that the bankers recommend an offer price (or gross proceeds) of $25 per share and Amy’s
Accessories will receive $23 per share. What is the underwriter’s spread on the issue?
35.
Calculating Costs of Issuing Debt Tennis Games, Inc., with the help of its investment
bank recently issued $25 million of new debt. The offer price (and face value) on the debt
was $1,000 per bond and the underwriter’s spread was 8 percent of the gross proceeds.
What is the amount of capital funding Tennis Games raised through this debt offering?
36.
Calculating Costs of Issuing Debt Soccer Games, Inc., with the help of its investment
bank recently issued $10 million of new debt. The offer price (and face value) on the debt
was $1,000 per bond and the underwriter’s spread was 5 percent of the gross proceeds.
What is the amount of capital funding Soccer Games raised through this debt offering?
37.
Calculating Costs of Issuing Debt Basketball Games, Inc., with the help of its investment
bank recently issued $5 million of new debt. The offer price (and face value) on the debt
was $1,000 per bond and the underwriter’s spread was 6 percent of the gross proceeds.
What is the amount of capital funding Basketball Games raised through this debt
offering?
38.
Calculating Costs of Issuing Debt Just Add Water, Inc., with the help of its investment
bank recently issued $200,000,000 of new debt. The offer price on the debt was $1,000 per
bond and the underwriter’s spread was 4 percent of the gross proceeds. What amount of
capital funding did Just Add Water raise through this bond issue?
39.
Calculating Fees on a Loan Commitment You have approached your local bank for a
start-up loan commitment for $1,000,000 needed to open a car repair store. You have
requested that the term of the loan be one year. Your bank has offered you the following
terms: size of loan commitment = $1,000,000, term = one year, up-front fee = 20 basis
points, back-end fee = 50 basis points, and rate on the loan = 9 percent. If you
immediately take down $750,000 and no more during the year, what is the total interest
and fees you have paid on this loan commitment?
40.
Calculating Fees on a Loan Commitment You have approached your local bank for a
start-up loan commitment for $500,000 needed to open a furniture repair store. You have
requested that the term of the loan be one year. Your bank has offered you the following
terms: size of loan commitment = $500,000, term = one year, up-front fee = 30 basis
points, back-end fee = 60 basis points, and rate on the loan = 10 percent. If you
immediately take down $250,000 and no more during the year, what is the total interest
and fees you have paid on this loan commitment?
41.
Calculating Fees on a Loan Commitment Starr Co. has been approved for a $100,000
loan commitment from its local bank. The bank has offered the following terms: term =
one year, up-front fee = 75 basis points, back-end fee = 25 basis points, and rate on the
loan = 8.00 percent. Starr expects to immediately take down $80,000 and no more during
the year unless there is some unforeseen need. What is the total interest and fees Starr
can expect to pay on this loan commitment?
42.
Calculating Costs of Issuing Debt Home Improvement, Inc., needs to raise $2 million to
finance plant expansion. In discussions with its investment bank, Home Improvement
learns that the bankers recommend a debt issue with gross proceeds of $1,000 per bond
and they will charge an underwriter’s spread of 7 percent of the gross proceeds. How
many bonds will Home Improvement need to sell in order to receive the $2 million they
need?
43.
Calculating Costs of Issuing Debt American Movers, Inc., needs to raise $5 million to
finance an expansion. In discussions with its investment bank, American learns that the
bankers recommend a debt issue with gross proceeds of $1,000 per bond and they will
charge an underwriter’s spread of 5 percent of the gross proceeds. How many bonds will
American Movers need to sell in order to receive the $5 million they need?
44.
Calculating Costs of Issuing Debt Roy’s Bar, Inc., needs to raise $25 million to finance
firm expansion. In discussions with its investment bank, Roy’s learns that the bankers
recommend a debt issue with an offer price of $1,000 per bond and they will charge an
underwriter’s spread of 6 percent of the gross price. How many bonds will Roy’s need to
sell in order to receive the $25 million they need?
45.
Calculating Costs of Issuing Debt R&D, Inc., needs to raise $200 million to finance firm
expansion. In discussions with its investment bank, R&D’s learns that the bankers
recommend a debt issue with an offer price of $1,000 per bond and they will charge an
underwriter’s spread of 3 percent of the gross price. How many bonds will R&D need to
sell in order to receive the $200 million they need?
46.
Calculating Costs of Issuing Stock Video Games, Inc., with the help of its investment
bank recently issued 10 million shares of new stock. The offer price on the stock was
$47.50 per share and Video Games received a total of $446,500,000 through this stock
offering. Calculate the net proceeds and the underwriter’s spread on the stock offering.
What percentage of the gross price is the investment bank charging Video Games for
underwriting the stock issue?
47.
Calculating Costs of Issuing Stock Volleyball Gear, Inc., with the help of its investment
bank recently issued 1.5 million shares of new stock. The offer price on the stock was
$18.50 per share and Volleyball Gear received a total of $26,917,500 through this stock
offering. Calculate the net proceeds and the underwriter’s spread on the stock offering.
What percentage of the gross price is the investment bank charging Volleyball Gear for
underwriting the stock issue?
48.
Calculating Costs of Issuing Stock Polly’s Ponies, Inc., with the help of its investment
bank recently issued 7.5 million shares of new stock. The offer price on the stock was
$15.00 per share and Polly’s Ponies received a total of $105.75 million from the stock
offering. Calculate the net proceeds and the underwriter’s spread charged by the
underwriter to Polly’s Ponies. What percentage of the gross proceeds is the investment
bank charging Polly’s Ponies for underwriting the stock issue?
49.
Calculating Costs of Issuing Stock Saddles and Bridles, Inc., with the help of its
investment bank recently issued 3 million shares of new stock. The offer price on the
stock was $23.50 per share and Saddles and Bridles received a total of $68.385 million
from the stock offering. Calculate the net proceeds and the underwriter’s spread charged
by the underwriter to Saddles and Bridles. What percentage of the gross proceeds is the
investment bank charging Saddles and Bridles for underwriting the stock issue?
50.
Calculating Costs of Issuing Stock Turbo Technology Corp. recently went public with an
initial public offering of 3 million shares of stock. The underwriter used a firm commitment
offering in which the net proceeds was $7.50 per share and the underwriter’s spread was 9
percent of the gross proceeds. Turbo Technology also paid legal and other administrative
costs of $200,000 for the IPO. Calculate the gross proceeds per share received by Turbo
Technology from the sale of the 3 million shares of stock.
51.
Calculating Costs of Issuing Stock Computer Technology Corp. recently went public with
an initial public offering of 7 million shares of stock. The underwriter used a firm
commitment offering in which the net proceeds was $8.35 per share and the underwriter’s
spread was 7 percent of the gross proceeds. Computer Technology also paid legal and
other administrative costs of $300,000 for the IPO. Calculate the gross proceeds per share
received by Computer Technology from the sale of the 7 million shares of stock.
52.
Calculating Costs of Issuing Stock TV Technology Corp. recently went public with an
initial public offering of 1.5 million shares of stock. The underwriter used a firm
commitment offering in which the net proceeds was $24.50 per share and the
underwriter’s spread was 5 percent of the gross proceeds. TV Technology also paid legal
and other administrative costs of $300,000 for the IPO. Calculate the gross proceeds per
share received by TV Technology from the sale of the 1.5 million shares of stock.