On January 20, Sullivan Inc., sold 10 million shares of stock in an SEO. The market price of Sullivan at the time was $40.25 per share. Of the 10 million shares sold, 4 million shares were primary shares being sold by the company, and the remaining 6 million shares were being sold by the venture capital investors. Assume the underwriter charges 4.5% of the gross proceeds as an underwriting fee. a. How much money did Sullivan raise? b. How much money did the venture capitalists receive? c. If the stock price dropped 2.7% on the announcement of the SEO and the new shares were sold at that price, how much money would Sullivan receive?
On January 20, Sullivan Inc., sold 10 million shares of stock in an SEO. The market price of Sullivan at the time was $40.25 per share. Of the 10 million shares sold, 4 million shares were primary shares being sold by the company, and the remaining 6 million shares were being sold by the venture capital investors. Assume the underwriter charges 4.5% of the gross proceeds as an underwriting fee. a. How much money did Sullivan raise? b. How much money did the venture capitalists receive? c. If the stock price dropped 2.7% on the announcement of the SEO and the new shares were sold at that price, how much money would Sullivan receive?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter15: Contributed Capital
Section: Chapter Questions
Problem 1MC
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Question
On January 20,
Sullivan
Inc., sold
10
million shares of stock in an SEO. The market price of
Sullivan
at the time was
$40.25
per share. Of the
10
million shares sold,
4
million shares were primary shares being sold by the company, and the remaining
6
million shares were being sold by the venture capital investors. Assume the underwriter charges
4.5%
of the gross proceeds as an underwriting fee.a. How much money did
Sullivan
raise? b. How much money did the venture capitalists receive?
c. If the stock price dropped
2.7%
on the announcement of the SEO and the new shares were sold at that price, how much money would
Sullivan
receive?Expert Solution
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