Which alternative has the larger percentage of spread

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Reference no: EM131869732

The Wrigley Corporation needs to raise $22 million. The investment banking firm of Tinkers, Evers & Chance will handle the transaction.

a. If stock is utilized, 1,600,000 shares will be sold to the public at $15.50 per share. The corporation will receive a net price of $14.00 per share. What is the percentage underwriting spread per share? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b. If bonds are utilized, slightly over 22,400 bonds will be sold to the public at $1,004 per bond. The corporation will receive a net price of $992 per bond. What is the percentage of underwriting spread per bond? (Relate the dollar spread to the public price.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

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

Stock

Bond

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

Yes

Reference no: EM131869732

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