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(Answered) Raising Capital Via Stock Issue With Underwriting


I want to check my logic. Based on my calculations the underwriter would loss money. But that makes no sense.;(See attached file for full problem description);---;If a corp wants to raise $20 million & its stock price is now $20 per share. The new issue will be priced at $18 per share. The underwriters' compensation will be 5% of the issue price. The firm will also incur expenses of $200,000. The out-of -pocket expenses for the underwriter are $300,000.;How many shares of stock must be sold for the company to net $20 million after costs and expenses?;Stock price $20;Common stock req $20,000,000;Public share price $18.00;Underwriter's comp 5% $55,556;Net per share $19.00;Expenses $200,000;Desired net $20,000,000;Number of shares 1,063,158;What profit or loss would the investment banker realize?;---;Attachments;underwriting.xls
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Raising Capital Via Stock Issue With Underwriting

 


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