An investment bank pays $34.70 per share for 4.2 million shares of GM Company in
ID: 2801555 • Letter: A
Question
An investment bank pays $34.70 per share for 4.2 million shares of GM Company in a firm commitment stock offering. It then can sell those shares to the public for $33 per share.
How much money does GM receive? (Enter your answer in dollars not in millions.)
What is the profit to the investment bank? (Enter your answer in dollars not in millions. Negative amount should be indicated by a minus sign. Do not round intermediate calculations.)
a.How much money does GM receive? (Enter your answer in dollars not in millions.)
Explanation / Answer
An investment bank pays $34.70 per share for 4.2 million shares of GM Company in a firm commitment stock offering. It then can sell those shares to the public for $33 per share.
a.
How much money does GM receive? (Enter your answer in dollars not in millions.)
$ 145,740,000.00
b.
What is the profit to the investment bank? (Enter your answer in dollars not in millions. Negative amount should be indicated by a minus sign. Do not round intermediate calculations.)
-$ 7,140,000.00
c.
What is the stock price of GM?
$ 33.00 Per share
Working for above:
a.
Total quantity of shares in numbers = Q= 4200000
Money received by GM
= Q x payment received by GM for per share from investment bank
= 4200000 x 34.70 = $ 145,740,000.00
(Since, Investment Bank Pays to GM @ $ 34.70 per share)
b.
Profit or loss to investment bank will be = (Selling amount for public - Payment to GM for per share) x Q
= (33.00 – 34.70) x 4200000
= - $ 7,140,000.00
Above signifies loss for investment bank.
c.
The price at which investment bank can sell to public is the stock price of GM i.e. $ 33 per share
a.
How much money does GM receive? (Enter your answer in dollars not in millions.)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.