In: Finance
The Wrigley Corporation needs to raise $17 million. The investment banking firm of Tinkers, Evers & Chance will handle the transaction.
a. If stock is utilized, 1,700,000 shares will be
sold to the public at $10.75 per share. The corporation will
receive a net price of $10.00 per share. What is the percentage
underwriting spread per share? (Do not round intermediate
calculations. Enter your answer as a percent rounded to 2 decimal
places.)
b. If bonds are utilized, slightly over 17,000
bonds will be sold to the public at $1,005 per bond. The
corporation will receive a net price of $997 per bond. What is the
percentage of underwriting spread per bond? (Relate the dollar
spread to the public price.) (Do not round intermediate
calculations. Enter your answer as a percent rounded to 2 decimal
places.)
c-1. Which alternative has the larger percentage
of spread?
Stock | |
Bond |
c-2. Is this the normal relationship between the
two types of issues?
Yes | |
No |