Calculating Costs of Issuing Stock Plains Corp.recently went public with an initial public offering in which they received a total of $25 million in new capital funding.The underwriter used a firm commitment offering in which the offer price was $25 and the underwriter's spread was $1.00.Plains also paid legal and other administrative costs of $800,000 for the IPO.What is the number of shares issued through this IPO?
A)1,075,000
B)1,041,667
C)1,032,000
D)1,008,334

Question

Quizplus · Accepted Answer

The number of shares issued is calculated as follows:Number of shares = Total capital raised / (Offer price - Underwriter's spread)= $25,000,000 / ($25 - $1)= 1,041,667 shares