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Calculating Costs of Issuing Stock Video Games, Inc
Calculating Costs of Issuing Stock Video Games, Inc., with the help of its investment bank recently issued 1018 million shares of new stock. The offer price on the stock was $48.40 per share and Video's received a total of $464,500,000 through this stock offering. Calculate the net proceeds and the underwriter's spread on the stock offering. What percentage of the gross price is the investment bank charging Video for underwriting the stock issue? (Round your intermediate calculations and final answer to 2 decimal places.)
Multiple Choice O28.60% O 2.7796 O 5.72% O 8.49%
Expert Solution
Net proceeds=$464,500,000
Net proceeds per share=$464,500,000/1,01,80,000
= 45.63 per share
Gross Proceeds=1,01,80,000* 48.40
= $ 492,712,000
Underwriter's funds= $ 492,712,000- $464,500,000
= $ 28,212,000
Underwriter's spread= $ 28,212,000 /1,01,80,000
= 2.77
% of gross=2.77 /48.40
= 0.0572 or 5.72%
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