53.
Calculating Costs of Issuing Stock Mick E Inc. plans to issue 25 million new shares of its
stock. In discussions with its investment bank, Mick E learns that the bankers recommend
a net proceed of $29.80 per share and they will charge an underwriter’s spread of 8.5
percent of the gross proceeds. In addition, Mick E must pay $3 million in legal and other
administrative expenses for the seasoned stock offering. Calculate the gross proceeds per
share received by Mick E from the sale of the 25 million shares of stock.
54.
Calculating Fees on a Loan Commitment During the last year you have had a loan
commitment from your bank to fund inventory purchases for your small business. The total
line available was $500,000, of which you took down $400,000. It is now the end of the
loan commitment period and your bank is asking you to pay the back-end fees. You have
misplaced the paperwork that listed the terms of the commitment, but you know you paid
total fees (this does not include any interest paid to borrow the $400,000) of $1,750 on
this loan commitment. You remember that the up-front fee was 25 basis points. What is
the back-end fee on this loan commitment?
55.
Calculating Fees on a Loan Commitment During the last year you have had a loan
commitment from your bank to fund inventory purchases for your small business. The total
line available was $500,000, of which you took down $300,000. It is now the end of the
loan commitment period and your bank is asking you to pay the back-end fees. You have
misplaced the paperwork that listed the terms of the commitment, but you know you paid
total fees (this does not include any interest paid to borrow the $300,000) of $5,000 on
this loan commitment. You remember that the up-front fee was 75 basis points. What is
the back-end fee on this loan commitment?
56.
Calculating Fees on a Loan Commitment During the last year you have had a loan
commitment from your bank to fund working capital for your business. The total line
available was $2,500,000, of which you took down $1,000,000. It is now the end of the loan
commitment period and your bank is asking you to pay the back-end fees. You have
misplaced the paperwork that listed the terms of the commitment, but you know you paid
total fees (this does not include any interest paid to borrow the $1,000,000) of $15,000 on
this loan commitment. You remember that the back-end fee was 30 basis points. Calculate
the front-end fee on this loan commitment.
57.
Calculating Fees on a Loan Commitment During the last year you have had a loan
commitment from your bank to fund working capital for your business. The total line
available was $25,000,000, of which you took down $20,000,000. It is now the end of the
loan commitment period and your bank is asking you to pay the back-end fees. You have
misplaced the paperwork that listed the terms of the commitment, but you know you paid
total fees (this does not include any interest paid to borrow the $20,000,000) of $110,000
on this loan commitment. You remember that the back-end fee was 60 basis points.
Calculate the front-end fee on this loan commitment.
58.
Calculating Costs of Issuing Stock Your company needs to raise $4 million to finance
plant expansion. In discussions with its investment bank, you learn that the bankers
recommend a gross price of $50 per share and that 90,000 shares of stock be sold. If the
net proceeds on the stock sale leaves your company with $4 million, what is the
underwriter’s spread on the stock issue?
59.
Calculating Costs of Issuing Stock Your company needs to raise $10 million to finance
plant expansion. In discussions with its investment bank, you learn that the bankers
recommend a gross price of $45 per share and that 240,000 shares of stock be sold. If the
net proceeds on the stock sale leave your company with $10 million, what is the
underwriter’s spread on the stock issue?
60.
Calculating Costs of Issuing Stock Your company needs to raise $50 million to finance
plant expansion. In discussions with its investment bank, you learn that the bankers
recommend a gross price of $75 per share and that 675,000 shares of stock be sold. If the
net proceeds on the stock sale leave your company with $50 million, what is the
underwriter’s spread on the stock issue?
61.
Calculating Costs of Issuing Stock Sandal Etc., Inc., needs to raise $49 million to finance
firm expansion. In discussions with its investment bank, Sandals learns that the bankers
recommend an offer price of $25 per share and that 2 million shares of stock be sold. If
the net proceeds on the stock sale leaves Sandal with $49 million, calculate the
underwriter’s spread on the stock issue.
62.
Calculating Costs of Issuing Stock TriState Corp. recently went public with an initial
public offering in which they received a total of $50 million in new capital funding. The
underwriter used a firm commitment offering in which the offer price was $30 and the
underwriter’s spread was $1.50. TriState also paid legal and other administrative costs of
$950,000 for the IPO. What is the number of shares issued through this IPO?
A.
1,698,333
1,787,720
1,754,386
1,666,667
63.
Calculating Costs of Issuing Stock Plains Corp. recently went public with an initial public
offering in which they received a total of $25 million in new capital funding. The
underwriter used a firm commitment offering in which the offer price was $25 and the
underwriter’s spread was $1.00. Plains also paid legal and other administrative costs of
$800,000 for the IPO. What is the number of shares issued through this IPO?
64.
Calculating Costs of Issuing Stock River Valley Corp. recently went public with an initial
public offering in which they received a total of $40 million in new capital funding. The
underwriter used a firm commitment offering in which the offer price was $10 and the
underwriter’s spread was $0.50. River Valley also paid legal and other administrative costs
of $750,000 for the IPO. What is the number of shares issued through this IPO?
65.
Calculating Costs of Issuing Stock Paige’s Purses, Inc., needs to raise $30 million in new
capital funding from a seasoned equity offering. In discussions with its investment bank,
Paige’s Purses learns that the bankers recommend a gross price of $25.00 per share and
they will charge an underwriter’s spread of $2.00 of the gross price. In addition, Paige’s
Purses must pay $2 million in legal and other administrative expenses for the seasoned
stock offering. What is the number of shares of stock that Paige’s Purses will need to sell
to raise the $30 million?
66.
Calculating Costs of Issuing Stock Beach Stuff, Inc., needs to raise $10 million in new
capital funding from a seasoned equity offering. In discussions with its investment bank,
Beach Stuff learns that the bankers recommend a gross price of $20.00 per share and they
will charge an underwriter’s spread of $1.75 of the gross price. In addition, Beach Stuff
must pay $1.5 million in legal and other administrative expenses for the seasoned stock
offering. What is the number of shares of stock that Beach Stuff will need to sell to raise
the $10 million?
67.
You have approached your local bank for a start-up loan commitment for $175,000 needed
to open a computer 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 = $175,000, term
= one year, up-front fee = 75 basis points, back-end fee = 80 basis points. If you take
down 75 percent of the total loan commitment, calculate the total fees you have paid on
this loan commitment.
68.
Calculate the total fees a firm would have to pay when its bank offers the firm the
following loan commitment: A loan commitment of $1,500,000 with an up-front fee of 95
basis points and a back-end fee of 25 basis points. The take-down on the loan is 50
percent.
69.
Husker’s Tuxedos, Inc., needs to raise $135 million to finance its plan for nationwide
expansion. In discussions with its investment bank, Husker’s learns that the bankers
recommend an offer price (or gross price) of $43.55 per share and they will charge an
underwriter’s spread of $2.25 per share. Calculate the net proceeds to Husker’s from the
sale of stock. How many shares of stock will Husker’s need to sell in order to receive the
$135 million they need?
70.
Don’s Captain Morgan, Inc., needs to raise $25.5 million to finance plant expansion. In
discussions with its investment bank, Don’s Captain Morgan learns that the bankers
recommend an offer price (or gross proceeds) of $19 per share and Don’s Captain Morgan
will receive $14.50 per share. How many shares of stock will Don’s Captain Morgan need
to sell in order to receive the $25.5 million they need?
71.
Kelly Girl’s Golf Games, Inc., with the help of its investment bank recently issued $7.95
million of new debt. The offer price (and face value) on the debt was $1,000 per bond and
the underwriter’s spread was 4 percent of the gross proceeds. Calculate the amount of
capital funding Kelly Girl’s Golf Games raised through this debt offering.
72.
Bailey’s Dog Pens, Inc., with the help of its investment bank recently issued $165,500,000
of new debt. The offer price on the debt was $1,000 per bond and the underwriter’s spread
was 7 percent of the gross proceeds. Calculate the amount of capital funding Bailey’s Dog
Pens, raised through this bond issue.
73.
You have approached your local bank for a start-up loan commitment for $290,000 needed
to open a computer 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 = $290,000, term
= one year, up-front fee = 45 basis points, back-end fee = 80 basis points, and rate on the
loan = 9.5 percent. If you immediately take down $175,000 and no more during the year,
calculate the total interest and fees you have paid on this loan commitment.