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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.
