Firm commitment versus best efforts. Astro Investment Bank offers Lunar Vacations the follow nitial public sale of equity: (a) a best efforts arrangement whereby Astro will keep 2.7% of the ret commitment arrangement of $10,400,000. Lunar plans on offering 1,000,000 shares at $12.59 pe public. If it sells 100% of the shares, which is the better choice for Lunar Vacations? Which is the Astro Investment Bank? Under the best efforts arrangement, what are the proceeds for Lunar Vacations? (Round to the nearest dollar.)

Firm commitment versus best efforts. Astro Investment Bank offers Lunar Vacations the follow nitial public sale of equity: (a) a best efforts arrangement whereby Astro will keep 2.7% of the ret commitment arrangement of $10,400,000. Lunar plans on offering 1,000,000 shares at $12.59 pe public. If it sells 100% of the shares, which is the better choice for Lunar Vacations? Which is the Astro Investment Bank? Under the best efforts arrangement, what are the proceeds for Lunar Vacations? (Round to the nearest dollar.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Astro Investment Bank offers Lunar Vacations the following options on its initial public sale of equity: (a) a best efforts arrangement whereby Astro will keep 2.4% of the retail sales or (b) a firm commitment arrangement of $10,100,000. Lunar plans on offering 1,000,000 shares at $11.36 per share to the public. If it sells 100% of the shares, which is the better choice for Lunar Vacations? Which is the better choice for Astro InvestmentBank?
Steel City Motors wants to have an initial public offering. Their investment bank presents two options for the initial issue: a fixed commitment offer of $6,800,000, or a best-efforts arrangement where the Investment bank receives $1.60 per share offered to the public. Steel City intends to sell 1,000,000 shares at a price of $9. If 100% of the shares are sold at the predetermined price, which arrangement should Steel City choose?
Rock Industries has hired the investment banking firm to help for going public. Rock and investment bank agree that Rock's current value of equity is $75 million. Rock currently has 5 million shares outstanding and will issue 2 million new shares. Investment bank charges a 7% spread. What is the offer price based on this information? a. $10.93 b. $15.00 c. $14.59 d. $10.71
Zang Industries has hired the investment banking firm of Eric, Schwartz, & Mann (ESM) to help it go public. Zang and ESM agree that Zang's current value of equity is $55 million. Zang currently has 3 million shares outstanding and will issue 2 million new shares. ESM charges a 5% spread. What is the correctly valued offer price? Do not round intermediate calculations. Round your answer to the nearest cent.
Dark Creek Corporation's CEO is selecting between two mutually exclusive projects. Thecompany needs to make a $3,500 payment to bondholders at the end of the year. To minimizeagency costs, the firm's bondholders decide to use a bond covenant to stipulate that thebondholders can demand an additional payment if the company chooses to take on the high-volatility project. How much additional payment to bondholders would make stockholdersindifferent between the two projects? Cash flows pertaining to the two projects are shown inthe table below. can you hand write please
Dark Creek Corporation's CEO is selecting between two mutually exclusive projects. Thecompany needs to make a $3,500 payment to bondholders at the end of the year. To minimizeagency costs, the firm's bondholders decide to use a bond covenant to stipulate that thebondholders can demand an additional payment if the company chooses to take on the high-volatility project. How much additional payment to bondholders would make stockholdersindifferent between the two projects? Cash flows pertaining to the two projects are shown inthe table below.
2) Zang Industries has hired the investment banking firm of Eric, Schwartz, & Mann (ESM) to help it go public. Zang and ESM agree that Zang's current value of equity is $58 million. Zang currently has 5 million shares outstanding and will issue 1.7 million new shares. ESM charges an 8% spread. What is the correctly valued offer price? Do not round intermediate calculations. Round your answer to the nearest cent. $ How much cash will Zang raise net of the spread (use the rounded offer price)? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar. $
A firm is making an initial public offering. The investment bankers agree to a firm-commitment underwriting for 480,000 shares that would be priced to the public at $33 per share. The underwriter’s spread is 6 percent. What will be the proceeds for the issuer and the underwriter?
Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding. Firm B Firm T Shares outstanding 4,600 1,000 Price per share $ 40 $ 14 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $8,800. If Firm T is willing to be acquired for $16 per share in cash, what is the NPV of the a. merger? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) What will the price per share of the merged firm be assuming the conditions in b. (a)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) If Firm T is willing to be acquired for $16 per share in cash, what is the merger c. premium? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) d. Suppose Firm T is agreeable to a merger by an exchange of stock. If B offers one of its shares for…
An investment bank pays $42.80 per share for 5.3 million shares of GM Company in a firm commitment stock offering. It then can sell those shares to the public for $52 per share.How much money does GM receive?
Chicago Savings Corp. is planning to make an offer for Ernie's Bank & Trust. The stock of Ernie's Bank & Trust is currently selling for $40 a share. a. If the tender offer is planned at a premium of 40 percent over market price, what will be the value offered per share for Ernie's Bank & Trust? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Value offered per share b. Suppose before the offer is actually announced, the stock price of Ernie's Bank & Trust goes to $50 because of strong merger rumors. If you buy the stock at that price and the merger goes through (at the price computed in part a), what will be your percentage gain? (Do not round intermediate calculations. Input the amount as a positive percent value rounded to 2 decimal places.) Percentage gain c. Because there is always the possibility that the merger could be called off after it is announced, you also want to consider your percentage loss if that happens. Assume you buy the…
Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding. Firm B Firm T Shares outstanding 6,400 1,600 Price per share $ 48 $ 19 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $8,900. a. If Firm T is willing to be acquired for $21 per share in cash, what is the NPV of the merger? b. What will the price per share of the merged firm be assuming the conditions in (a)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If Firm T is willing to be acquired for $21 per share in cash, what is the merger premium? d. Suppose Firm T is agreeable to a merger by an exchange of stock. If B offers one of its shares for every two of T's shares, what will the price per share of the merged firm be? (Do not round intermediate calculations and round your answer to 2…

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