Hilltop, Inc. is offering 1,300 shares of stock in a Dutch auction. The bids include: How much cash will Hilltop receive from selling these shares? Ignore all transaction and ﬂotation costs.

Question

Hilltop, Inc. is offering 1,300 shares of stock in a Dutch auction. The bids include:  How much cash will Hilltop receive from selling these shares? Ignore all transaction and ﬂotation costs.

Quizplus · Accepted Answer

In a Dutch auction, the price is set at the lowest bid that will sell all the shares being offered. The bids in this case are not given, but we can use the number of shares being offered and the fact that all of them will be sold to calculate the price. If we divide the total number of shares (1,300) by the highest bidder's bid quantity (25), we get the number of bids that will be accepted: 52. The lowest accepted bid will be the 52nd highest bid, or the bid quantity of $450. So, Hilltop will receive 1,300 shares x $450 per share = $23,400. Therefore, the answer is choice C).