74.
One Stop has been approved for a $55,000 loan commitment from its local bank. The bank
has offered the following terms: term = one year, up-front fee = 85 basis points, back-end
fee = 35 basis points, and rate on the loan = 9.75 percent. Casey’s expects to immediately
take down $45,000 and no more during the year unless there is some unforeseen need.
Calculate the total interest and fees Casey’s One Stop can expect to pay on this loan
commitment.
75.
Sipe’s Paint and Wallpaper, Inc., needs to raise $1.25 million to finance plant expansion. In
discussions with its investment bank, Sipe’s Paint and Wallpaper 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 8.25 percent of the gross proceeds. How many bonds will Sipe’s
Paint and Wallpaper need to sell in order to receive the $1.25 million they need?
76.
Renee’s Boutique, Inc., needs to raise $300 million to finance firm expansion. In
discussions with its investment bank, Renee’s Boutique 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 7.125 percent of the gross price. How many bonds will Renee’s
Boutique need to sell in order to receive the $300 million they need?
77.
Kelly Girl’s Golf Games, Inc., with the help of its investment bank recently issued 1.5
million shares of new stock. The offer price on the stock was $36.25 per share and Kelly
Girl’s Golf Games received a total of $50,000,000 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 Kelly Girl’s Golf Games for underwriting the
stock issue?
78.
Bailey’s Dog Pens, Inc., with the help of its investment bank recently issued 5 million
shares of new stock. The offer price on the stock was $15 per share and Bailey’s Dog Pens
received a total of $65 million from the stock offering. What percentage of the gross
proceeds is the investment bank charging Bailey’s Dog Pens for underwriting the stock
issue?
79.
Bailey’s Dog Pens, Inc., with the help of its investment bank recently issued 5 million
shares of new stock. The offer price on the stock was $19.5 per share and Bailey’s Dog
Pens received a total of $70 million from the stock offering. What percentage of the gross
proceeds is the investment bank charging Bailey’s Dog Pens for underwriting the stock
issue?
80.
Howett Pockett, Inc., plans to issue 10 million new shares of its stock. In discussions with
its investment bank, Howett Pockett learns that the bankers recommend a net proceed of
$15 per share and they will charge an underwriter’s spread of 6.5 percent of the gross
proceeds. In addition, Howett Pockett must pay $1 million in legal and other administrative
expenses for the seasoned stock offering. Calculate the gross proceeds per share from the
sale of the 10 million shares of stock.
81.
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 $10,000,000, of which you took down
$9,125,000. It is now the end of the loan commitment period and your bank had you 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 $9,125,000) of $31,100 on this loan commitment. You remember that the back–
end fee was 85 basis points. Calculate the front-end fee on this loan commitment.
82.
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 $10,000,000, of which you took down
$7,800,000. It is now the end of the loan commitment period and your bank had you 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 $7,800,000) of $51,200 on this loan commitment. You remember that the back–
end fee was 112 basis points. Calculate the front-end fee on this loan commitment.
83.
Sipe’s Paint and Wallpaper, Inc., needs to raise $1.25 million to finance plant expansion. In
discussions with its investment bank, Sipe’s Paint and Wallpaper learns that the bankers
recommend a gross price of $37.20 per share and that 48,500 shares of stock be sold. If
the net proceeds on the stock sale leaves Sipe’s Paint and Wallpaper with $1.25 million,
calculate the underwriter’s spread on the stock issue.
84.
Renee’s Boutique, Inc., needs to raise $75.25 million to finance firm expansion. In
discussions with its investment bank, Renee’s Boutique learns that the bankers
recommend an offer price of $67 per share and that 1.25 million shares of stock be sold. If
the net proceeds on the stock sale leaves Renee’s Boutique with $75.25 million, calculate
the underwriter’s spread on the stock issue.
85.
Hughes Technology Corp. recently went public with an initial public offering in which they
received a total of $42 million in new capital funding. The underwriter used a firm
commitment offering in which the offer price was $22 and the underwriter’s spread was
$0.85. Hughes Technology also paid legal and other administrative costs of $825,000 for
the IPO. Calculate the number of shares issued through this IPO.
86.
Howett Pockett, Inc., needs to raise $80 million in new capital funding from a seasoned
equity offering. In discussions with its investment bank, Howett Pocket learns that the
bankers recommend a gross price of $47.50 per share and they will charge an
underwriter’s spread of $2.50. In addition, Howett Pockett must pay $3 million in legal and
other administrative expenses for the seasoned stock offering. Calculate the number of
shares of stock that Howett Pockett will need to sell to raise the $80 million.
87.
A security issued in which the underwriter does not guarantee a firm price to the issuer
and acts more as a placing or distribution agent for a fee is referred to as:
88.
Wealthy individuals who make equity investments in firms are referred to as:
89.
All of the following are advantages of an IPO EXCEPT:
90.
The advantage of the shelf registration is that:
91.
A syndicate is:
92.
Most business loans today are:
93.
A facility fee is:
94.
A commitment fee is:
95.
Which of the following is an example of an appropriate loan covenant?