Calculating Costs of Issuing Stock 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 gross proceeds per share can be calculated by dividing the net proceeds per share by (1 - underwriter's spread). So, $24.50 / (1 - 0.05) = $25.79. However, the correct gross proceeds per share is $26.00, which is the amount before deducting the underwriter's spread.