Ajax Corporation Has Received a Firm Commitment from Its Underwriter

question 92

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.Calculate both the direct expense of issuance and the indirect (i.e.,underpricing)expense.What percentage of the market value of the shares is represented by these costs?

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Definitions:

Erie Canal

A historic canal in New York, opened in 1825, playing a crucial role in the westward expansion and economic growth of the United States by linking the Great Lakes with the Atlantic Ocean.

Global Perception

The way a particular issue, entity, or concept is viewed and understood by people around the world, influenced by cultural, social, and individual factors.

Mill Girls

Young women who worked in the textile mills during the Industrial Revolution, particularly noted in the 19th century in the United States, often to support their families under challenging conditions.

Labor Force

The total number of people employed or actively seeking employment in a country or region.