Managerial Finance

>E ?r-bh"'r \g-\ I C,XCEL DOC Part I Tactical F'inancial Decis:ior.rs

more important the role of investment banks vnhen the company sells a new issue of stock? Explain your answer.

{:i:i :i: The SEC attempts to protect investors rvho are making sure that the information put out by a

Price to public

Number of shares

Proceeds to Beedles

Lg neu,ly issued securities by and its investnrent banks is

is not misleading. However, the does not provide an opinion about the real the securities; hence an pay too much for some new stock and

heavily. Do you SEC should, as a pafi of every new stock or bond offering, an npinion to on the proper value of the securities being offered? Explain.

(18-4) How do you think of items would affect a company's ability to attract ner.r' capital and the costs involved in doing so?

A decision of a company to go public tion of the "buy side" of the stock and bond marketsThe i

The trend financial as opposed to stand-alone investment

of the preemptive right troduction in 1981 of shelf of securities

entering a formal agreement, investment banks carefully investigate the companies securities they underwritq this is especially true of the issues of firms going public

for the first time. Because the banks do not themselves plan to hoid the securities but intend to sell them to otirers as soon as possibie, why are they so concerned about making carefu1 investigations?

(sr-1) Blue Coral (BCB) is planning an underwriters have said the stock will sell at $20 per The direct costs printing, etc.) will be $800,000. The underwriters 'urill a

How ust BCB sell to net $30 million? If price the first day at $22, how much cash has IICB left on the

c. What are BCB's total costs , indirect, and underwriting) for the IPO?

l1;,35:: "1,-,"-'.r.1:. ;i -- ' , "'

Gr"i security Brokers Inc. specializes in underwriting new issues by small firms. on a recent profit or Ltr\?n# offering of Beedles Inc., the terms were as follows:

Stock Issue

a,

b.

c.

d.

a.

b.

$5 per share

3 nrillion

$14,000,000

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