(a) To finance the business expansion, YB Corporation sold 50 million shares in its IPO at...

 

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(a) To finance the business expansion, YB Corporation sold 50 million shares in its IPO at a price of $8.50 in year 2021 in the US. The underwriting fee is 7%. In addition, YB Corporation also paid a total of $6.2 million in legal fees, accounting fees, administrative costs, printing fees and other costs. Its initial price was $9.20. (0) Calculate the net proceeds that YB Corporation received from its IPO. [15 marks] (ii) Calculate the total costs of this IPO. [10 marks] (III) Differentiate primary market from secondary market and explain in what market a firm can raise its funds for business expansion from investors, [15 marks] (M) After one year of the listing, we estimated the bete of YB Corporation using the historical daily stock prices. The correction coefficient between the return of the stock and the return of S&P 500 is 0.85. The standard deviation of the stock is 18% and the standard deviation of S&P 500 is 12%. If the treasury bill rate is 2% and the expected return of S&P 500 is 10%, calculate the cost of equity of YB Corporation. U JUST vi Jur Jun 15 deviation of the stock is 18% and the standard deviation of S&P 500 is 12%. If the treasury bill rate is 2% and the expected return of S&P 500 is 10%, calculate the cost of equity of YB Corporation. [15 marks] b) The capital asset pricing model only considers systematic risk. Explain why it is so. Moreover, with appropriate diagrams, critically explain any TWO (2) factors which could reduce the portfolio risk. (a) To finance the business expansion, YB Corporation sold 50 million shares in its IPO at a price of $8.50 in year 2021 in the US. The underwriting fee is 7%. In addition, YB Corporation also paid a total of $6.2 million in legal fees, accounting fees, administrative costs, printing fees and other costs. Its initial price was $9.20. (0) Calculate the net proceeds that YB Corporation received from its IPO. [15 marks] (ii) Calculate the total costs of this IPO. [10 marks] (III) Differentiate primary market from secondary market and explain in what market a firm can raise its funds for business expansion from investors, [15 marks] (M) After one year of the listing, we estimated the bete of YB Corporation using the historical daily stock prices. The correction coefficient between the return of the stock and the return of S&P 500 is 0.85. The standard deviation of the stock is 18% and the standard deviation of S&P 500 is 12%. If the treasury bill rate is 2% and the expected return of S&P 500 is 10%, calculate the cost of equity of YB Corporation. U JUST vi Jur Jun 15 deviation of the stock is 18% and the standard deviation of S&P 500 is 12%. If the treasury bill rate is 2% and the expected return of S&P 500 is 10%, calculate the cost of equity of YB Corporation. [15 marks] b) The capital asset pricing model only considers systematic risk. Explain why it is so. Moreover, with appropriate diagrams, critically explain any TWO (2) factors which could reduce the portfolio risk.

Answer rating: 100% (QA)

a 1 Calculate the total costs of this IPO Underwriting fee is 7 of amount raised from IPO Amount raised from IPO 50 million shares x 850 per share 425 ... View the full answer