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What is the percentage underwriting spread per share

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Question - The Wrigley Corporation needs to raise $45 million. The investment banking firm of Tinkers, Evers & Chance will handle the transaction.

a. If stock is utilized, 2,500,000 shares will be sold to the public at $21.00 per share. The corporation will receive a net price of $18.00 per share. What is the percentage underwriting spread per share?

b. If bonds are utilized, slightly over 45,000 bonds will be sold to the public at $1,008 per bond. The corporation will receive a net price of $995 per bond. What is the percentage of underwriting spread per bond?

c-1. Which alternative has the larger percentage of spread?

c-2. Is this the normal relationship between the two types of issues?

Reference no: EM132616046

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