On January 20, Metropolitan Inc., sold 8 million shares of stock in an SEO. The

Question

On January 20, Metropolitan Inc., sold 8 million shares of stock in an SEO. The market price of Metropolitan at the time was $41.25 per share. Of the 8 million shares sold, 4 million shares were primary shares being sold by the company, and the remaining 4 million shares were being sold by the venture capital investors. Assume the underwriter charges 47% 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 2.6% on the announcement of the SEO and the new shares were sold at that price, how much money would Metropolitan receive? a. How much money did Metropolitan raise? After underwriting fees, Metropolitan raised $1-1 million. (Round to two decimal places.)

Explanation / Answer

a) The company sold 4 million shares at $41.25 per share, so it raised ($41.25) x (4,000,000) = 165 million

After underwriting fees it will keep 165 x ( 1- 0.047) = 157.25 millions

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