Ajax Corporation Has Received a Firm Commitment from Its Underwriter

question 108

Essay

Ajax Corporation has received a firm commitment from its underwriter to purchase 1 million shares of stock that will be marketed to the general public at $23 per share. The underwriter's spread is $1.90 per share and the issuing firm will pay an additional $1.65 million in legal and other fees. The issue was fully sold on the first day and the stock closed at $27.50 on that day. What percentage of the market value of the shares is lost to issue costs?

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Definitions:

Individual Deterrence

A principle in criminal justice intended to discourage an individual from committing future offenses through the imposition of penalties.

Significant Effect

A notably large or important impact or influence on a situation, process, or condition.

Utilitarian Philosophy

An ethical theory suggesting that the best action is the one that maximizes utility, usually defined as that which produces the greatest well-being of the greatest number of people.

Preventing Crime

Actions or strategies designed to stop criminal activities before they occur.