An IPO Was Priced to Sell at $23 a Share

question 71

Multiple Choice

An IPO was priced to sell at $23 a share and closed at $22 a share at the end of the first day of trading. The underwriting spread was 7% of the offer price and the legal, accounting and administrative costs were $1.6 million. What was the total percentage cost of the issue as a percentage of the market value at the end of the first day if 250,000 shares were offered?

• A) 38.87%
• B) 31.86%
• C) 42.08%
• D)36.41%

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Definitions:

Economic Goods

Items or services that have a price and are scarce in relation to their demand, thus necessitating economic decision-making.

Scarce Resources

Raw materials, labor, and capital that are limited in availability, requiring societies to make decisions on their allocation and use.

Unit-Costs

Expenses a firm faces for producing, holding, and marketing one unit of a given product or service.

Restricts Trade

Actions or policies implemented by governments or economic entities to limit or control the exchange of goods and services across borders.