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1. Gus' Games stock currently sells for $50 per share. There are 4 million shares currently outstanding. The company announces plans to raise $5 million by offering shares to the public at a price of $45 per share.
a) If the underwriting spread is 4%, how many shares will the company need to issue in order to be left with the net proceeds of $5 million?
b) If other administrative costs are $90,000, what is the dollar value of the total direct costs of the issue?
2. The three possible outcomes of an investment are listed below. All outcomes are equally likely. Calculate the average profit, variation and the standard deviation of this investment.
Profit
Best Case +$400
Most Likely +$150
Worst Case -$300
What values should the company use for the four variables given here when it performs its best-case scenario analysis? What about the worst-case scenario?
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