Question

A mid-sized firm plans to issue 10 million shares during an IPO. The underwriter plans to sell shares at $23.60; however, many investors believe the company should be valued at $31.45 per share. If the underwriter charges a $1.3 million fee to undertake the IPO, how much will the firm raise in the IPO

Answer 1

$234,700,000

Step-by-step explanation:

Data provided

Offer price = $23.60

Shares offered = $10,000,000

Underwriting charges = $1,300,000

The computation of firm raise in the IPO is shown below:-

Firm will raise = (Offer price × Shares offered) - Underwriting charges

= ($23.60 × $10,000,000) - $1,300,000

= $236,000,000 - $1,300,000

= $234,700,000

So, we have applied the above formula.