Calculating Costs of Issuing Stock Turbo Technology Corp.recently went public with an initial public offering of 3 million shares of stock.The underwriter used a firm commitment offering in which the net proceeds was $7.50 per share and the underwriter's spread was 9 percent of the gross proceeds.Turbo Technology also paid legal and other administrative costs of $200,000 for the IPO.Calculate the gross proceeds per share received by Turbo Technology from the sale of the 3 million shares of stock.
A)$7.50
B)$7.57
C)$8.24
D)$8.32

Question

Quizplus · Accepted Answer

The gross proceeds per share can be calculated by dividing the net proceeds per share by (1 - underwriter's spread). So, $7.50 / (1 - 0.09) = $8.24.