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 $6.75 per share for 2 million shares.The IPO underwriters had a spread of 9%.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 $6.75 per share for 2 million shares.The IPO underwriters had a spread of 9%.What was the total fee paid to the underwriters?

Quizplus · Accepted Answer

The total fee paid to the underwriters is calculated by multiplying the total amount raised by the IPO with the underwriters' spread percentage. The total amount raised is $6.75 per share for 2 million shares, which equals $13,500,000. The underwriters' spread is 9% of this amount, so the fee is $13,500,000 * 9% = $1,215,000.

Use the Table for the Question(s)below