Concept explainers
a)
To discuss:
To calculate the total proceeds of IPO.
Introduction:
Initial public offering or IPO is the first public sale of a firm’s stock. IPO is usually made by small and growing companies that require additional capital.
b)
To discuss:
To calculate the percentage underwriter discount.
Introduction:
Initial public offering or IPO is the first public sale of a firm’s stock. IPO is usually made by small and growing companies that require additional capital. The underwriting discount is the fee paid to the underwriters by the issuing firm
c)
To discuss:
To calculate the dollar amount of the underwriting fee.
Introduction:
Initial public offering or IPO is the first public sale of a firm’s stock. IPO is usually made by small and growing companies that require additional capital. The underwriting discount is the fee paid to the underwriters by the issuing firm.
d)
To discuss:
To calculate the net proceeds of IPO.
Introduction:
Initial public offering or IPO is the first public sale of a firm’s stock. IPO is usually made by small and growing companies that require additional capital. The net proceeds is the difference between the total proceeds and the underwriting fees.
e)
To discuss:
To calculate the IPO underpricing.
Introduction:
A public offering is defined as the sale of bonds or stocks to the general public when the company or firm that issues the share has to raise a large amount as capital. The percentage change from the final IPO offer price to the IPO market price on the first day in the market is known as IPO underpricing.
f)
To discuss:
To calculate the market capitalization.
Introduction:
A public offering is defined as the sale of bonds or stocks to the general public when the company or firm that issues the share has to raise a large amount as capital. The market capitalization is the total market value of the firm’s outstanding stock.
Want to see the full answer?
Check out a sample textbook solutionChapter 2 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
- Question content area top What are the formulas to figure out these problems? I have the answer but I want to be able to figure out how to get the answer. Part 1 (Common stock valuation) Dubai Metro's stock price was at $100 per share when it announced that it will cut its dividend for next year from $10 per share to $6 per share, with additional funds used for expansion. Prior to the dividend cut, Dubai Metro expected its dividends to grow at a 4 percent rate, but with the expansion, dividends are now expected to grow at 7 percent. How do you think the announcement will affect Dubai Metro's stock price? Question content area bottom Part 1 a. What is the investor's required rate of return for Dubai Metro's stock? 14.0014.00% (Round to two decimal places.) Part 2 b. What would be the price of Dubai Metro's stock if they cut the dividend to $6? $85.7185.71 (Round to the nearest cent.) Part 3 c. How do you think Dubai Metro's stock price…arrow_forwardOn November 7, 2013, Twitter released its initial public offering (IPO) priced at $26 per share. When the day ended, it was priced at $44.90, reportedly making about 1600 people into millionaires in a single day.[20] At the time it was considered a successful IPO. Four years later, Twitter is trading at around $18 per share. Why do you think that occurred? Is Twitter profitable? How can you find out?arrow_forwarda) Ace Company stockholder's equity at the end of 2015 is shown in the table below. Determine the number of preferred shares issued; and b) Determine the issue price of each ordinary share, if we assume that the ordinary shares are issued all at one time. Show and explain the solution step by step. Preference share capital, €10 par value €500,000 Share premium – Preference €280,000 Ordinary share capital, €25 stated value Share premium - Ordinary €1,500,000 €900,000 Treasury Shares (10,000 ordinary shares) Retained earnings €150,000 €1,235,000arrow_forward
- The Trinidad and Tobago NGL Limited (NGL), is one of the stocks listed in the Energy Sector on the local stock exchange. The company’s initial public offering (IPO) was in October 2015 and the company was listed for the first time on October 19, 2015; at an opening price of $20.00. Required: If an investor purchased shares in the IPO at $20.00, would this investor have experienced a capital gain or loss if he/she decided to sell the stock on June 25, 2021. When did this share trade at its highest price since its IPO? What was this price? If an investor who purchased shares at the IPO, sold his holdings on this day, what would have been his capital gain/loss? Based on your analysis in parts i) and ii), what do you garner about investing in the stock market? If an investor held NGL shares since its IPO, what is the total dividends per share that he/she would have received to date? Provide details by payment date. Date Open Close Change Change % Volume Traded June 25th 2021 18.17…arrow_forwardInsta Corp. invests in shares of other companies in 2015 for generating profit as shown below; Market Value Dec. 31 Security Purchase date 2016 Date sold Selling price Cost 2015 DT June 2015 48.000TL 54.000TL T 60.800TL Feb. 2017 59.600TL EA June 2015 116.000TL 104.800TL March 114.000TL 2016 a. Classify each investment as trading or available for sale. DT: EA: b. Prepare the necessary journal entries for Insta Corp. (Hint: entries for purchase of securities, adjusting entries at Dec.31 2015 and 2016, entries for sale of securities).arrow_forwardLL R You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry, LotsofDebt, Inc. finances its $36.00 million in assets with $33.00 million in debt and $3.00 million in equity. LotsofEquity, Inc finances its $36.00 million in assets with $3.00 million in debt and $33..00 million in equity. Calculate the debt ratio. (Round your answers to 2 decimal places.) LotsofDebt, Inc. LotsofEquity. Ino Calculate the equity multiplier. (Round your answers to 2 declmal places.) Equity multiplier LotsofDebt, Inc. LotsofEquity. Ine. Calculate the debt-to-equity. (Round your answers to 2 declmal places.) Debt-to-equity LotsofDebt. Inc. LotsofEquity, Inc. Mc <. Prev MED Type here to search DOOH F2 F4 F5 F7 F10 F11 F12 PrtScr 8- & 23 24 2 ) 4. 5. 9. 7. 8. %3D } 1arrow_forward
- q2b- You bought a DEF share on 1 January 2015 for $22.50 and sold it one year later for $28.50. During the year, DEF paid a dividend of $1.50 per share. Calculate the dividend yield, the capital gain yield and the total yield.arrow_forwardEQUITY INVESTMENTS Problem 4 On January 1, 2018, ABC Company purchased 40,000 shares of RST at P100 per share. The investment in measurement at fair value through other comprehensive income. Brokerage fees measured to P120,000. A P5 dividend per share of RST had been declared on December 15, 2017 to be paid on March 31, 2018 to shareholders of record on January 31, 2018. No other transactions occurred in 2018 affecting the investment in RST shares. What is the initial measurement of the investment? 4,120,000 a. b. 4,000,000 c. 3,920,000 d. 3,800,000 Problem 5 Care Company received dividends from its share investments during the year ended December 31, 2011 as follows: • A stock dividend of P4,000 shares from Part Company on July 31, 2011 when the market price of Part's share was P20. Care owns less than 1% of Part's share capital. • A cash dividend of P150,000 from Shark Company in which Day owns a 25% interest. Majority of Shark's director are also directors of Care. What amount of…arrow_forwardBriefly outline the significance of the EPS as a measure of financial performance Outline TWO (2) disclosure and presentation requirements of IAS33 The firm had 10 million common stocks in issue for the year ending December 31 2022. On the 1 January 2023 it had issued $2 million of 6% convertible debentures, each $5.00 of debentures can be converted into four common shares on the 1 of January at the option of the holder of the debenture. The firm had profit after tax for the year ended December 31, 2022, of $1 850 000. The firm pays tax at 30% for the year ended. Required: Calculate the Basic and diluted EPS for the year 2022 Outline the need to disclose a diluted EPS figure and on the relevance of this to the shareholarrow_forward
- Question list Question 1 O Question 2 Question 3 Question 4 Question 5 K Initial Public Offering. A biotechnology company, Keros Therapeutics, completed its IPO on April 8, 2020, and listed on the Nasdaq. Keros sold 6,000,000 shares of stock to primary market investors at an IPO offer price of $16.04, with an underwriting discount of 6.7%. Secondary market investors, however, were paying $20.26 per share for Keros' 19,189,391 shares of stock outstanding (which includes the newly-issued shares). a. Calculate the total proceeds for Keros' IPO. b. Calculate the dollar amount of the underwriting fee for Keros' IPO. c. Calculate the net proceeds for Keros' IPO. d. Calculate market capitalization for Keros' outstanding stock. e. Calculate IPO underpricing for Keros' IPO. f. Explain the IPO underpricing for Keros. a. The total proceeds for Keros' IPO is $ (Round to the nearest dollar.) b. The dollar amount of the underwriting fee for Keros' IPO is $. (Round to the nearest dollar.) c. The net…arrow_forwardAssume you purchased ten shares of Roku during the companys IPO. Comment on why this might be a good investment. Consider factors such as what you expect to get from your investment, why you think Roku would become a publicly traded company, and what you think is the landscape of the industry Roku is in. What other factors might be relevant to your decision to invest in Roku?arrow_forwardGloria Enterprises plans to go public with a public offering. Management would like to determine the potential price for its shares of common stock based on comparable price-earnings multiples. Gloria Enterprises reports earnings of $208,000 and plans to issue 80,000 shares of stock. The EPS and share price of three comparable firms are shown below: Firm EPS Share Price A $2.50 $ 89.20 В 3.60 119.70 2.00 83.54 Calculate the value of a share of Gloria Enterprises' stock using the price-earnings multiples method for both a trailing multiple and a forward multiple.arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningFinancial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeFundamentals Of Financial Management, Concise Edi...FinanceISBN:9781337902571Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningPFIN (with PFIN Online, 1 term (6 months) Printed...FinanceISBN:9781337117005Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning