Raybac Is About to Go Public

question 97

Multiple Choice

Raybac is about to go public. Its present shareholders own 500,000 shares. The new public issue will represent 800,000 shares. The shares will be priced at $25 to the public with a 4% spread. The out-of pocket costs will be $450,000. What are the net proceeds to the firm.

• A) $18,750,000
• B) $19,200,000
• C) $18,250,000
• D) $19,550,000

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Definitions:

Value Increases

Situations in which the worth of an asset or investment rises over time.

Classic Automobile

A vehicle of significant historical interest, typically older models that are collected, preserved, or restored for their nostalgic value and beauty.

Simple Interest

The calculation of interest on the principal amount only, without compounding over time.

Higher Risk Investment

An investment with a greater chance of resulting in a loss or underperforming but potentially offering higher returns.