Raybac Is About to Go Public

question 119

Multiple Choice

Raybac is about to go public. Its present stockholders own 500,000 shares. The new public issue will represent 700,000 shares. The shares will be priced at $25 to the public with a 5% spread. The out-of-pocket costs in addition to the spread will be $450,000. What are the total per-share underwriting fees to the investment banker?

• A) $1.50
• B) $23.50
• C) $1.25
• D) $1.89