The Fitness Studio, Inc., with the help of its investment bank, recently issued

Question

The Fitness Studio, Inc., with the help of its investment bank, recently issued 3.4 million shares of new stock. The offer price on the stock was $16.50 per share and The Fitness Studio received a total of $52,173,000 through this stock offering.

Calculate the net proceeds per share and the underwriter's spread per share on the stock offering. (Round your answers to 3 decimal places.)

Net proceeds $ ____ per share

Underwriter’s spread $ ____ per share

What percentage of the gross price is the investment bank charging The Fitness Studio for underwriting the stock issue?

Percent underwriting spread ___%

Explanation / Answer

Gross proceeds= 3.4 million shares * $16.5 per share= $56.1 million or $56100000

Net proceeds= $52173000

Underwriting spread= Gross proceeds- Net proceeds= $56100000-$52173000= $3927000

Net proceed per share= $52173000/3400000 shares= $15.345

Underwriter spread per share= $3927000/3400000 Shares= $ 1.155

Underwrited spread percentage= Underwriter spread per share/Offer price of the stock*100= $1.155/$16.5*100= 7%

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