Allied Corporation offers 40,000 shares of common stock to the public in an initial public offering (IPO). The underwriters agree to provide their services in a best efforts underwriting. The offering price is set at $28. The gross spread is $3. After completing their sales efforts the underwriters determine that they were able to sell a total of 36,750 shares. How much cash did Allied Corporation receive from their IPO?

Question

Quizplus · Accepted Answer

Allied Corporation would receive $918,750 from their IPO. This is calculated by multiplying the number of shares sold (36,750) by the offering price ($28) and then subtracting the gross spread per share ($3) from the offering price before multiplying. The calculation is as follows: 36,750 shares * ($28 - $3) = 36,750 * $25 = $918,750.

Allied Corporation Offers 40,000 Shares of Common Stock to the Public