Raybac is about to go public. Its present stockholders own 500,000 shares. The new public issue will represent 700,000 shares. The shares will be priced at $25 to the public with a 5% spread. The out-of-pocket costs in addition to the spread will be $450,000. What are the total per-share underwriting fees to the investment banker?
A) $1.50
B) $23.50
C) $1.25
D) $1.89

Question

Quizplus · Accepted Answer

(450,000 + (700,000 × 25 × 0.05)) / 700,000 shares = $1.89
Please note that the out-of-pocket costs are in addition to the spread.

Raybac Is About to Go Public