Calculating Costs of Issuing Stock Turbo Technology Corp. recently went public w

Question

Calculating Costs of Issuing Stock Turbo Technology Corp. recently went public with an initial public offering of 3.14 million shares of stock. The underwriter used a firm commitment offering in which the net proceeds was $8.20 per share and the underwriter's spread was 8 percent of the gross proceeds. Turbo also paid legal and other administrative costs of $340,000 for the IPO. Calculate the gross proceeds per share received by Turbo from the sale of the 3.14 million shares of stock.

A. $8.92

B. $8.31

C. $8.20

D. $9.03

Explanation / Answer

Net Proceeds =( Gross Proceeds * 0.92)-340000

Net Proceeds + 3400000 = 0.92 Gross proceeds

(3140000*8.20)+340000 = 0.92 Gross Proceeds

26088000 = 0.92 Gross Proceeds

Gross Proceeds = 28356521.74

Gross Proceeds per share = 9.03

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