Use the table for the question(s)below.
David founds a company and goes through the investment rounds shown below:
He decides to take the company public through an IPO,issuing 2 million new shares.Assuming that he successfully completes the IPO,the net income for the next year is estimated to be $8 million.His banker informs him that the price of shares should be set using average price-earnings ratios for similar businesses,which is 15.0.
-An IPO is offered at $12.50 per share for 4 million shares.The IPO underwriters had a spread of 6.5%.What was the total fee paid to the underwriters?

Question

Use the table for the question(s)below.
David founds a company and goes through the investment rounds shown below:
  He decides to take the company public through an IPO,issuing 2 million new shares.Assuming that he successfully completes the IPO,the net income for the next year is estimated to be $8 million.His banker informs him that the price of shares should be set using average price-earnings ratios for similar businesses,which is 15.0.
-An IPO is offered at $12.50 per share for 4 million shares.The IPO underwriters had a spread of 6.5%.What was the total fee paid to the underwriters?

Quizplus · Accepted Answer

The total fee paid to the underwriters is calculated by multiplying the IPO price per share by the number of shares and then by the underwriter's spread percentage: $12.50 * 4,000,000 * 6.5% = $3.25 million.

Use the Table for the Question(s)below