Problem 10-10 A company goes public with an offering price of $16. There is a 7 percent underwriting spread. There is al
Posted: Tue Nov 16, 2021 8:15 am
Problem 10-10
A company goes public with an offering price of $16. There is a
7 percent underwriting spread. There is also a 15 percent
overallotment option. The company is selling 25 million shares. The
underwriter fills orders for 28.75 million shares but has not
exercised the overallotment option. The stock drops to $19. How
much would it cost the underwriter to cover the short position? Do
not round intermediate calculations. Round your answer to the
nearest dollar.
$
If the underwriter used all its profits from the short position
to purchase shares, how many shares would it purchase (include the
shares that must be purchased to cover the short position)? Do not
round intermediate calculations. Round your answer to the nearest
whole number.
shares
A company goes public with an offering price of $16. There is a
7 percent underwriting spread. There is also a 15 percent
overallotment option. The company is selling 25 million shares. The
underwriter fills orders for 28.75 million shares but has not
exercised the overallotment option. The stock drops to $19. How
much would it cost the underwriter to cover the short position? Do
not round intermediate calculations. Round your answer to the
nearest dollar.
$
If the underwriter used all its profits from the short position
to purchase shares, how many shares would it purchase (include the
shares that must be purchased to cover the short position)? Do not
round intermediate calculations. Round your answer to the nearest
whole number.
shares