Present value help, Basic Buildings Inc. has decided to go

Present value help

Assignment Help Finance Basics

Reference no: EM1329229

Basic Buildings Inc. has decided to go public with a $5,000,000 new equity issue. Its investment bankers agreed to take a smaller fee now (6 percent of par value versus 10 percent) in exchange for a 1-year option to purchase an additional 200,000 shares of the company at $5.00 per share. The investment banking firm expects to exercise its option and purchase the 200,000 shares in exactly one year's time when the stock price is expected to be $6.50 per share. However, if the stock price is actually $12.00 per share one year from now, what is the present value of the entire underwriting agreement to the investment banker? Assume that the investment banker's required return on such arrangements is 15 percent and ignore any tax considerations.

Reference no: EM1329229

Questions Cloud

Calculate the present value of a deposit : How much would you have to invest today to receive:

Strengths and criticisms of each of theories : Discuss the strengths and criticisms of each of the theories/models.

Elucidate what would be the budget request : Elucidate what would be the budget request for FY13 for this effort.

Write down the normalized entities in the correct format : Write down the normalized entities in the correct format.

Present value help : Basic Buildings Inc. has decided to go public with a $5,000,000 new equity issue. Its investment bankers agreed to take a smaller fee now (6 percent of par value versus 10 percent) in exchange for a 1-year option to purchase an additional 200,000 ..

Find the optimal job sequence for this serial system : Find the optimal job sequence for this serial system with the minimum makespan.

Provide reasons to explain what the government : Provide reasons to explain what the government would have to do to keep the unemployment rate

Find the collection of decidable languages is closed : find the collection of decidable languages is closed.

Computing the annuity due by using excel : Terry Austin is 30 years old and is saving for her retirement. She is planning on making 36 contributions to her retirement account at the beginning of each of the next 36 years.

User Account

All Pages