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21 April, 10:26

The Boat Works decided to go public by offering a total of 135,000 shares of common stock to the public. The company hired an underwriter who arranged a firm commitment underwriting and an initial selling price of $24 a share with a spread of 8.3 percent. As it turned out, the underwriters only sold 122,400 shares to the public. What is the amount paid to the issuer

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  1. 21 April, 13:28
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    The amount paid to the issuer is $2,971,080.

    Explanation:

    The total number of shares is 135,000.

    Though only 122,400 shares are sold to the public.

    The initial selling price is $24.

    The spread percentage is given at 8.3%.

    The amount paid to the issuer will be

    =Total number of shares*Initial selling price (1-spread)

    =135,000*24 * (1-0.083)

    =135,000*24*0.917

    =2,971,080

    So, the amount paid to the issuer is $2,971,080.
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