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55.
Miller Motors has decided to sell 1,800 shares of stock through a Dutch auction. The bids
received are as follows:
How much will Miller Motors receive in total from selling the 1,600 shares? Ignore all
transaction and flotation costs.
56.
Bakers' Town Bread is selling 1,200 shares of stock through a Dutch auction. The bids
received are as follows:
How much cash will Bakers' Town Bread receive from selling these shares of stock?
Ignore all transaction and flotation costs.
57.
Webster Electrics is offering 1,500 shares of stock in a Dutch auction. The bids include:
How much cash will Webster Electrics receive from selling these shares? Ignore all
transaction and flotation costs.
58.
You are a broker and have been instructed to place an order for a client to purchase 500
shares of every IPO that comes to market. The next two IPOs are each priced at $25 a
share and will begin trading on the same day. The client is allocated 500 shares of IPO A
and 100 shares of IPO B. At the end of the first day of trading, IPO A was selling for $23.50
a share and IPO B was selling for $29 a share. What is the client's total profit or loss on
these two IPOs as of the end of the first day of trading?
59.
Richard has an outstanding order with his stock broker to purchase 1,000 shares of every
IPO. The next three IPOs are each priced at $30 a share and will all start trading on the
same day. Richard is allocated 1,000 shares of IPO A, 400 shares of IPO B, and 100 shares
of IPO C. On the first day of trading IPO A opened at $31.50 a share and ended the day at
$28.25 a share. IPO B opened at $31 a share and finished the day at $32 a share. IPO C
opened at $36.50 a share and ended the day at $38.75 a share. What is Richard's total
profit or loss on these three IPOs as of the end of the first day of trading?
60.
Two IPOs will commence trading next week. Scott places an order to buy 300 shares of
IPO A. Steve places an order to purchase 300 shares of IPO A and 300 shares of IPO B.
Both IPOs are priced at $20 a share. Scott is allocated 100 shares of IPO A. Steve is
allocated 100 shares of IPO A and 300 shares of IPO B. At the end of the first day of
trading, IPO A is selling for $22.70 a share and IPO B is selling for $18.60 a share. What is
the difference in the total profits or losses that Scott and Steve have as of the end of the
first day of trading?
61.
Wear Ever is expanding and needs $12.6 million to help fund this growth. The firm
estimates it can sell new shares of stock for $35 a share. It also estimates it will cost an
additional $340,000 for filing and legal fees related to the stock issue. The underwriters
have agreed to a 7 percent spread. How many shares of stock must Wear Ever sell if it is
going to have $12.6 million available for its expansion needs?
62.
Mountain Teas wants to raise $11.6 million to open a new production center. The company
estimates the issue costs including the legal and accounting fees will be $440,000. The
underwriters have set the stock price at $17.50 a share and the underwriting spread at 9
percent. How many shares of stock does Mountain Teas have to sell to meet its cash
need?
63.
Outdoor Living needs $7.5 million to finance modifications to its production equipment
because the design of its all-season tents has changed dramatically. The underwriters
estimate that the firm could sell additional shares of stock at $14.50 a share with a 7.5
percent underwriting spread. This would be a firm commitment underwriting. The
estimated issue costs are $125,000. How many shares of stock will Outdoor Living need to
sell to finance this project?
64.
High Mountain Mining wants to expand its current operations and requires $3.5 million in
additional funding to do so. After discussing this with key shareholders, the firm has
decided to raise the necessary funds through a rights offering at a subscription price of
$18 a share. The current market price of the firm's stock is $22 a share. How many shares
of stock will the firm need to sell through the rights offering to fund the expansion plans?
65.
Northwest Rail wants to raise $14.2 million through a rights offering so it can purchase
additional rail cars and upgrade its maintenance facilities. How many shares of stock will
the firm need to sell through this offering if the current market price is $34 a share and the
subscription price is $31 a share?
66.
A.K. Stevenson wants to raise $7.5 million through a rights offering. The subscription price
is set at $24. Currently, the company has 2.1 million shares outstanding with a current
market price of $25 a share. Each shareholder will receive one right for each share of
stock they currently own. How many rights will be needed to purchase one new share of
stock in this offering?
67.
The Motor Plant wants to raise $21.4 million through a rights offering so it can modernize
its facilities. The subscription price for the offering is set at $11 a share. Currently, the
company has 2.6 million shares of stock outstanding at a market price of $12.50 a share.
Each shareholder will receive one right for each share of stock they own. How many rights
will a shareholder need to purchase one new share of stock in this offering?
68.
Miller Fruit wants to expand its citrus grove operations. The firm estimates that it needs
$8.6 million to buy land and establish its operations. Currently, the firm has 540,000 shares
of stock outstanding at a market price per share of $34.80. If the firm decides to raise the
needed capital through a rights offering, one right will be issued for each share of stock.
The subscription price will be set at $33 a share. How many rights will a shareholder need
to purchase one new share of stock in this offering?
69.
Jefferson Refining is issuing a rights offering wherein every shareholder will receive one
right for each share of stock they own. The new shares in this offering are priced at $19
plus 3 rights. The current market price of the stock is $23 a share. What is the value of one
right?
70.
The stock of Cleaner Home Products is currently selling for $26.40 a share. The company
has decided to raise funds through a rights offering wherein every shareholder will receive
one right for each share of stock they own. The new shares being offered are priced at $25
plus five rights. What is the value of one right?
71.
Barstow Industrial Supply has decided to raise $27.52 million in additional funding via a
rights offering. The firm will issue one right for each share of stock outstanding. The
offering consists of a total of 860,000 new shares. The current market price of the stock is
$38. Currently, there are 5.16 million shares outstanding. What is the value of one right?
72.
You currently own 8 percent of the 3.5 million outstanding shares of Webster Mills. The
company has just announced a rights offering with a subscription price of $28. One right
will be issued for each share of outstanding stock. This offering will provided $9 million of
new financing for the firm, ignoring all issue costs. Assume that all rights are exercised.
What will be your new ownership position if you opted to sell your rights rather than
exercise them personally?
73.
Jennifer owns 14,000 shares of Calico Clothing. Currently, there are 1.6 million shares of
stock outstanding. The company has just announced a rights offering whereby 200,000
shares are being offered for sale at a subscription price of $14 a share. The current stock
price is $16 a share. Assume that Jennifer sells her rights and that all rights are exercised.
What percentage of the firm will Jennifer own after the rights offering?
