Calculating Costs of Issuing Stock Video Games, Inc

question 81

Multiple Choice

Calculating Costs of Issuing Stock Video Games, Inc., with the help of its investment bank recently issued 10 million shares of new stock. The offer price on the stock was $47.50 per share and Video's received a total of $446,500,000 through this stock offering. Calculate the net proceeds and the underwriter's spread on the stock offering. What percentage of the gross price is the investment bank charging Video's for underwriting the stock issue?

• A) 3%
• B) 30%
• C) 6%
• D) 9%

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Definitions:

Standard Costs

Predetermined costs for materials, labor, and overhead that are used for budgeting and cost control purposes.

Raw Materials

The unprocessed natural materials or substances used in the initial stages of production or manufacturing.

Cost System

A method used to allocate costs to products, services, projects, or departments to facilitate financial analysis, budgeting, and managerial decision-making.

Gallons

A unit of volume measurement used primarily for liquids, commonly used in the United States.