TV Technology Corp. recently went public with an initial public offering of 1.5 million shares of stock. The underwriter used a firm commitment offering in which the net proceeds was $24.50 per share and the underwriter's spread was 5 percent of the gross proceeds. TV Technology also paid legal and other administrative costs of $300,000 for the IPO. Calculate the gross proceeds per share received by TV Technology from the sale of the 1.5 million shares of stock.
A) $24.50
B) $24.70
C) $25.79
D) $26.00

Question

Quizplus · Accepted Answer

The net proceeds per share is $24.50, which is 95% of the gross proceeds due to the 5% underwriter's spread. Therefore, the gross proceeds per share is $24.50 / 0.95 = $25.79.