In: Finance
Eastern Electric wants to sell 2,100 shares of stock in a Dutch auction. The bids include: 1,400 shares at $32 a share, 1,500 shares at $31, 1,400 shares at $30, and 900 shares at $29 a share. How much cash will Eastern Electric receive from selling these shares? Ignore all transaction and flotation costs
The Dutch auction is also known as uniform price auction. Here
the cumulative demand for shares is calculated and at the point
when the required number of shares satisfies the cumulative demand
the price is set.
We can understand it as follows:
Formulas used:
So, the price is $31 and the number of shares required is
2100.
Total value=$31*2100=$65100
Answer: $65,100