The Koepka Co and the Johnson Co. have both announced IPOS at $59 per share. OnE of these is undervalued by $18.50, and the other is overvalued by $9.00, but you have no way of knowing which is which. You plan on buying 1,950 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled. O. Assuming you could get 1,950 shares in Koepka and 1,950 shares in Johnson, what would your profit be? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What profit do you actually expect? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.., 32.16.) c. What principle have you illustrated? a. Profit b. Expected profit c. Principle C.

The Koepka Co and the Johnson Co. have both announced IPOS at $59 per share. OnE of these is undervalued by $18.50, and the other is overvalued by $9.00, but you have no way of knowing which is which. You plan on buying 1,950 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled. O. Assuming you could get 1,950 shares in Koepka and 1,950 shares in Johnson, what would your profit be? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What profit do you actually expect? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.., 32.16.) c. What principle have you illustrated? a. Profit b. Expected profit c. Principle C.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation

Section: Chapter Questions

Problem 9MC

See similar textbooks

Similar questions

The Woods Co. and the Mickelson Co. have both announced IPOs at $53 per share. One of these is undervalued by $11, and the other is overvalued by $2, but you have no way of knowing which is which. You plan to buy 800 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled. If you could get 800 shares in Woods and 800 shares in Mickelson, what would your profit be? (Do not round intermediate calculations.) I found the price of an ideal situaiton but am not sure how to distribute numbers in the expected profit situation
Damron, Incorporated, has 205,000 shares of stock outstanding. Each share is worth $79, so the company’s market value of equity is $16,195,000. Suppose the firm issues 44,000 new shares at the following prices: $79, $73, and $67. What will be the ex-rights price and the effect of each of these alternative offering prices on the existing price per share? (Leave no cells blank; if there is no effect select "No change" from the dropdown and enter "0". Round your answers to 2 decimal places, e.g., 32.16.)
Damron, Incorporated, has 205,000 shares of stock outstanding. Each share is worth $79, so the company’s market value of equity is $16,195,000. Suppose the firm issues 44,000 new shares at the following prices: $79, $73, and $67. What will be the ex-rights price and the effect of each of these alternative offering prices on the existing price per share?
The Peter Corp. and the Sellers Company have both announced IPOs. You place an order for 950 shares of each IPO. One of the IPOs is underpriced by $14.00 and the other is overpriced by $6.75. If you could get all of the shares you ordered for each IPO, what would your profit be?
Nemesis, Incorporated, has 136,000 shares of stock outstanding. Each share is worth $110, so the company's market value of equity is $14,960,000. Suppose the firm issues 17,000 new shares at the price of $110, what will the effect be of this offering price on the existing price per share? Suppose the firm issues 17,000 new shares at the price of $99, what will the effect be of this offering price on the existing price per share? Suppose the firm issues 17,000 new shares at the price of $82, what will the effect be of this offering price on the existing price per share?
Management wants to use a reverse split to get the price up to a more "reasonable" level, which it thinks is $25 per share. How many of the old shares must be given up for one new share to achieve the ... In recent years Constable Inc. has suffered losses, and its stock currently sells for only $0.50 per share.
Bullant Inc. has decided to go public and has sold 2 million of its shares to its underwriter for $20 per share. The underwriter then sold them to the public for $22 each. Bullant also encountered $0.5 million in administrative fees. Soon after the issue, the stock price rose to $25. Find Bullant s total cost of this issue including any underpricing.
A firm conducting an IPO of common staock sold 1 million new shares in the offering at an offer price of $10 dollars per share. After the offering, the firm had 5 million shares outstanding, and the price of those shares in the secondary market was $12. The Firms IPO was underpriced by?
Simmons Mineral Operations, Inc., (SMO) currently has 430,000 shares of stock outstanding that sell for $50 per share. Assuming no market imperfections or tax effects exist, what will the share price be after: a. SMO has a four-for-three stock split? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) New share price $ b. SMO has a 10 percent stock dividend? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) New share price $ c. SMO has a 43.5 percent stock dividend? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) New share price $ d. SMO has a three-for-seven reverse stock split? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) New share price $ e. Determine the new number of shares outstanding in parts…
LYFT IPO was issued at $72/share. Before the IPO, Lyft had 240 million class A shares outstanding and wanted to issue additional 30 million class A shares. On top of that, Lyft gave its underwriters options to purchase another 5 million shares at $72 each. When Lyft stock price fell below the IPO price of $72, to support the stock price, up to how many shares the underwriters could buy from the open market without losing money? 5 million shares 30 million shares 35 million shares 240 million shares 275 million shares
Suppose Buyer Company in the problem above had invested $2,400 directly in Target’s common stock one year ago at $40 per share and sold it today at $50 per share. What would the Buyer Company’s dollar profit or loss be?
David's Watersports Firm is considering a public offering of common stock. Its investment banker has informed the company that the retail price will be $16.85 per share for 550,000 shares. The company will receive $15.40 per share and will incur $180,000 in registration, accounting, and printing fees. A. What is the spread on this issue in percentage terms? What are the total expenses of the issue as a percentage of total value (at retail)? B. If the firm wanted to net $15.99 million from this issue, how many shares must be sold?