You Decide to Take Your Company Public by Offering a Total

question 63

Multiple Choice

You decide to take your company public by offering a total of 300,000 shares of common stock in an initial public offering (IPO) . You hire an underwriter who arranges a full commitment underwriting
At a 7 percent spread. As it turns out, the underwriters only sell 265,000 shares at $24 each. How
Much cash will you receive from your IPO?

• A) $5,914,800
• B) $6,360,000
• C) $6,696,000
• D) $7,200,000
• E) $7,704,000

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Definitions:

Yield To Maturity

The expected total yield on a bond, assuming it is kept until maturity, encompassing all the interest earnings plus the return of the principal.

Forward Rate

The agreed-upon price for a financial transaction to be executed at a future date, used particularly in currency and interest rate markets.

2-year Bond

A debt security that matures in two years and typically offers periodic interest payments.

Stripped Treasuries

Securities derived from U.S. Treasury bonds by separating the coupons from the principal, allowing them to be sold separately as zero-coupon bonds.