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?

---

Definitions:

Strategic Importance

The significance or value of a decision, action, or asset in achieving long-term organizational objectives or competitive advantage.

Operational Decision

Decisions made at the operational level of an organization focusing on the day-to-day operations and activities.

Chief Supply Officer

A top executive responsible for overseeing and managing an organization's supply chain and procurement strategy, ensuring efficiency and effectiveness.

Time Horizon

The length of time over which an investment or a business project is expected to be active or achieve a certain goal.