Charles Darwin University

ACCOUNTING

Week 9 Quiz 1

1)Bavarian Brewhouse is planning on going public. Under the underwriting  agreement the underwriting discount is $1.25 per share. If the offering price of the stock is set at

$12.50 per share, what is the percentage underwriting discount?

1. 1. 8%
   2. 9%

c.  10%

d.  11%

2. Bavarian Brewhouse is planning  an  IPO. Under the terms of the IPO, Bavarian Brewhouse will issue 8 million shares at an offer price of $25 per share. The underwriter charges are 9% underwriting fee and direct costs are estimated to be $7 million. The stock is expected to trade at  $30 at the end of the first trading day. What is the total amount of funds raised by Bavarian Brew through the IPO?
   1. $175 million
   2. $182 million
   3. $200 million
   4. $150 million

3. Bavarian Brewhouse is planning on going public. Under the underwriting agreement the underwriting discount is $1.30. Legal and other expenses amount to $1,350,000. If the offering price of the stock is set at $12.50 per share, how many shares does the company have to issue to raise $75 million? a. 6,696,429

b.  6,816,964

c.   6,000,000

d.  5,769,345

4. Bavarian Brewhouse is planning  an  IPO. Under the terms of the IPO, Bavarian Brewhouse will issue 8 million shares at an offer price of $25 per share. The underwriter charges are 9% underwriting fee and direct costs are estimated to be $7 million. The stock is expected to trade at $30 at the end of the first trading day. What are the total costs (underwriting and underpricing) of the Bavarian Brewhouse IPO?
   1. $25 million
   2. $40 million
   3. $65 million
   4. $80 million

5. Bavarian Brewhouse is planning  an  IPO. Under the terms of the IPO, Bavarian Brewhouse will issue 8 million shares at an offer price of $25 per share. The underwriter charges are 9% underwriting fee and direct costs are estimated to be $7 million. The stock is expected to trade at $30 at the end of the first trading day. What are the total underwriting fees for this  Bavarian Brewhouse IPO?
   1. $18 million
   2. $7 million
   3. $25 million
   4. $10 million

6. Which of the following is not considered an advantage of going public?
   1. new capital for the company
   2. listed stock for use as compensation
   3. stock price emphasis
   4. personal wealth and liquidity

7. A company faces costs of 9%  of the  amount of cash raised for an IPO. If the company needs to raise net $10 million, what is the total amount of money that needs to be raised?

a.   $10,800,000

b.   $10,989,011

c.   $12,456,875

d.  $8,458,950

8. A bank that helps firms to acquire external capital is called a
   1. commercial bank
   2. savings bank
   3. investment bank
   4. credit union

9. Bavarian Brewhouse is planning an IPO. Under the terms of the IPO, Bavarian

Brewhouse will issue 8 million shares at an offer price of $25 per share. The underwriter charges are 9% underwriting fee and direct costs are estimated to be $7 million. The stock is expected to trade at  $30 at the end of the first trading day. What is the initial return earned by investors on this Bavarian Brewhouse IPO?

a.  20%

b.  15%

c.  17%

d.  22%

10. Bavarian Brewhouse is planning on going public. Under the underwriting agreement the underwriting discount is $1.30. If the offering price of the stock is set at $12.50 per share, how many shares does the company have to issue to raise $75 million? a. 6,000,000

b.  5,789,452

c.   5,000,000

d.  6,696,429

11. Bavarian Brewhouse is planning on going public. Under the underwriting  agreement the underwriting discount is $1.25. If the offering price of the stock is set at $12.50 per share and the company is planning on issuing 1 million shares, what are the total proceeds that Bavarian will receive?

a.   12,500,000

b.   11,250,000

c.   13,750,000

d.   10,875,000

12. Smith Enterprises recently conducted an IPO. In this, Smith received $14 per share from the underwriter, the offering price per share was $16 and the stock price rose to $19 on the first day of trading. What is the total percentage costs of the IPO (underwriting and underpricing)?

a.  35.7%

b.  14.3%

c.   18.8%

d.  21.4%

13. Bavarian Brewhouse is planning an IPO. Under the terms of the IPO, Bavarian Brewhouse will issue 8 million shares at an offer price of $25 per share. The underwriter charges are 9% underwriting fee and direct costs are estimated to be $7 million. The stock is expected to trade at $30 at the end of the first trading day. What are the total costs caused by underpricing?
    1. $8 million
    2. $40 million
    3. $32 million