The Boat Works decided to go public by offering a total of 135,000 shares of common stock to the public. The company hired an underwriter who arranged a firm commitment underwriting and an initial selling price of $24 a share with a spread of 8.3 percent. As it turned out, the underwriters only sold 122,400 shares to the public. What is the amount paid to the issuer?

Question

Quizplus · Accepted Answer

First, we need to calculate the amount of money raised by the underwriters by multiplying the number of shares sold (122,400) by the offering price ($24):
$24 x 122,400 = $2,940,000

Next, we need to calculate the underwriting spread as a percentage of the offering price:
8.3% = 0.083

Then we calculate the total amount of underwriting fees earned by the underwriters by multiplying the offering price by the number of shares sold by the spread:
$24 x 122,400 x 0.083 = $233,080.80

Finally, we can calculate the amount paid to the issuer by subtracting the underwriting fees from the total amount raised by the underwriters:
$2,940,000 - $233,080.80 = $2,706,919.20

Therefore, the correct answer is C.

The Boat Works Decided to Go Public by Offering a Total