On January 20, Metropolitan, Inc., sold 10 million shares of stock in an SEO. The market price
Question:
On January 20, Metropolitan, Inc., sold 10 million shares of stock in an SEO. The market price of Metropolitan at the time was $42.50 per share. Of the 10 million shares sold, 5 million shares were primary shares being sold by the company, and the remaining 5 million shares were being sold by the venture capital investors. Assume the underwriter charges 5.2% of the gross proceeds as an underwriting fee.
a. How much money did Metropolitan raise?
b. How much money did the venture capitalists receive?
c. If the stock price dropped 2.4% on announcement of the SEO and the new shares were sold at that price, how much money would Metropolitan receive?
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9781292437156
5th Global Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford