Saddles and Bridles, Inc

question 49

Multiple Choice

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?

• A) 3 percent
• B) 6 percent
• C) 9 percent
• D) 97 percent

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Definitions:

Long-term Asset

A long-term asset is a resource owned by a company, providing economic benefits for a period extending beyond one year, including property, plant, and equipment.

Balance Sheet

A document that presents a snapshot of a corporation's financial health, by detailing assets, liabilities, and shareholders' equity on a specific date.

Direct Financing Leases

Leases where the lessor purchases an asset and leases it out, and the lease payments cover the purchase cost, plus a return on investment to the lessor.

Net Investment

The total amount spent on purchasing new assets and maintaining existing ones, minus any depreciation.