FIN 3005 FIN3005 Week 5 Individual Work 1 (Everest University)

FIN 3005 FIN3005 Week 5 Individual Work 1 (Everest University)

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FIN3005 Week 5 Individual Work 1 (Everest University)

 

Questions and Applications

3.  IPOs: Why do firms engage in IPOs? What is the amount of the fees that the lead underwriter and its syndicate charge a firm that is going public? Why are there many IPOs in some periods and few IPOs in other periods?

21. IPO Dilemma: Denton Company plans to engage in an IPO and will issue 4 million shares of stock. It is hoping to sell the shares for an offer price of $14. It hires a securities firm, which suggests that the offer price for the stock should be $12 per share to ensure that all the shares can easily be sold. Explain the dilemma for Denton Company. What is the advantage of following the advice of the securities firm? What is the disadvantage? Is the securities firm’s incentive to place the shares aligned with that of Denton Company?


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