Problem 15-10 Underwriting spread [LO2] If stock is utilized, 1,600,000 shares w
ID: 2624980 • Letter: P
Question
Problem 15-10 Underwriting spread [LO2]
If stock is utilized, 1,600,000 shares will be sold to the public at $20.55 per share. The corporation will receive a net price of $17 per share. What is the percentage underwriting spread per share? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
If bonds are utilized, slightly over 27,200 bonds will be sold to the public at $1,003 per bond. The corporation will receive a net price of $998 per bond. What is the percentage of underwriting spread per bond? (Relate the dollar spread to the public price.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Which alternative has the larger percentage of spread?
Is this the normal relationship between the two types of issues?
references
Explanation / Answer
The Wrigley Corporation needs to raise $27 million. The investment banking firm of Tinkers, Evers, & Chance will handle the transaction.
If stock is utilized, 1,600,000 shares will be sold to the public at $20.55 per share. The corporation will receive a net price of $17 per share. What is the percentage underwriting spread per share? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
If bonds are utilized, slightly over 27,200 bonds will be sold to the public at $1,003 per bond. The corporation will receive a net price of $998 per bond. What is the percentage of underwriting spread per bond? (Relate the dollar spread to the public price.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Which alternative has the larger percentage of spread?
Is this the normal relationship between the two types of issues?
a.If stock is utilized, 1,600,000 shares will be sold to the public at $20.55 per share. The corporation will receive a net price of $17 per share. What is the percentage underwriting spread per share? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)