Calculating Costs of Issuing Stock Computer Technology Corp.recently went public with an initial public offering of 7 million shares of stock.The underwriter used a firm commitment offering in which the net proceeds was $8.35 per share and the underwriter's spread was 7 percent of the gross proceeds.Computer Technology also paid legal and other administrative costs of $300,000 for the IPO.Calculate the gross proceeds per share received by Computer Technology from the sale of the 7 million shares of stock.
A)$8.35
B)$8.39
C)$8.98
D)$9.02

Question

Quizplus · Accepted Answer

The net proceeds per share is $8.35, which is 93% of the gross proceeds (since the underwriter's spread is 7%). To find the gross proceeds per share, divide $8.35 by 0.93, which equals approximately $9.02.