Eastern Electric wants to sell 2,100 shares of stock in a Dutch auction. The bids include:...

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

Solutions

Expert Solution

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

jeff jeffy answered 2 years ago

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