Zoom Delivery Ltd, an online parcel delivery service is expanding rapidly after the pandemic caused by Covid-19. It is planning to raise $35 million (this is the net amount required) to finance its business expansion. The offer price is $20 per share to the public and the underwriter charges 7% spread with a standby underwriting arrangement. a)How many shares does the company have to issue to achieve its capital raising goal? b)Assume that the issue becomes unsuccessful, as they only receive 95% subscriptions of the total number of shares offered. What would be the total proceeds and how much would the company and the underwriter receive respectively?
Zoom Delivery Ltd, an online parcel delivery service is expanding rapidly after the pandemic caused by Covid-19. It is planning to raise $35 million (this is the net amount required) to finance its business expansion. The offer price is $20 per share to the public and the underwriter charges 7% spread with a standby underwriting arrangement. a)How many shares does the company have to issue to achieve its capital raising goal? b)Assume that the issue becomes unsuccessful, as they only receive 95% subscriptions of the total number of shares offered. What would be the total proceeds and how much would the company and the underwriter receive respectively?
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 2P
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Zoom Delivery Ltd, an online parcel delivery service is expanding rapidly after the pandemic caused by Covid-19. It is planning to raise $35 million (this is the net amount required) to finance its business expansion. The offer price is $20 per share to the public and the underwriter charges 7% spread with a standby underwriting arrangement.
a)How many shares does the company have to issue to achieve its capital raising goal?
b)Assume that the issue becomes unsuccessful, as they only receive 95% subscriptions of the total number of shares offered. What would be the total proceeds and how much would the company and the underwriter receive respectively?
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