You decide to take your company public by offering a total of 300,000 shares of common stock in an initial public offering (IPO). You hire an underwriter who arranges a full commitment underwriting
At a 7 percent spread. As it turns out, the underwriters only sell 265,000 shares at $24 each. How
Much cash will you receive from your IPO?

Question

Quizplus · Accepted Answer

The underwriters sold only 265,000 shares, so the total amount of cash received is 265,000 x $24 = $6,360,000. However, the underwriters take a 7% spread, which means they keep 7% of the total amount raised. Therefore, the amount of cash that the company receives is $6,360,000 x (1-0.07) = $5,914,800. Therefore, the correct answer is C.

You Decide to Take Your Company Public by Offering a Total