What should be the price of the stock to public

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The investment banking firm of Einstein & Co. will use a dividend valuation model to appraise the shares of the Modern Physics Corporation. Dividends (D1) at the end of the current year will be $1.75. The growth rate (g) is 13 percent and the discount rate (Ke) is 15 percent.

a. What should be the price of the stock to the public? (Do not round intermediate calculations and round your answer to 2 decimal places.)

Price of the stock _________

b. If there is a 4 percent total underwriting spread on the stock, how much will the issuing corporation receive? (Do not round intermediate calculations and round your answer to 2 decimal places.)

Net price to the corporation ________

c. If the issuing corporation requires a net price of $86.00 (proceeds to the corporation) and there is a 4 percent underwriting spread, what should be the price of the stock to the public? (Do not round intermediate calculations and round your answer to 2 decimal places.)

Necessary Public price ______

Reference no: EM131933980

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