Question#1
Myriad Biotech plans a $104 million IPO in which the offering price to the public will be $51 per share. The company will receive $43 per share. The firm’s legal fees, SEC registration fees, and other out-of-pocket costs will total $687,500. If the stock price increases 14 percent on the first day of trading, what will be the total cost of issuing the securities? (Round answer to the nearest whole dollar, e.g. 5,275.)
Total Cost: $
Question#2
Suppose two firms want to borrow money from a bank for a period of one year. Firm A has excellent credit, whereas Firm B’s credit standing is such that it would pay. The firm’s credit standing is prime + 3 percent. The current prime rate is 6.85 percent, the three-month Treasury bond yield is 4.37 percent, the three-month Treasury bill yield is 3.52 percent, and the 10-year Treasury note yield is 4.26 percent. Now suppose that Firm B decides to get a term loan for 10 years. What is the loan rate for the firm?
Firm B’s loan rate= %
How does this affect the company’s borrowing cost?
Company’s borrowing Cost will= Decrease Increase remain same ?
Question#3
Suppose two firms want to borrow money from a bank for a period of one year. Firm A has excellent credit, whereas Firm B’s credit standing is such that it would pay prime + 3 percent. The current prime rate is 6.65 percent, the 30-year Treasury bond yield is 4.33 percent, the three-month Treasury bill yield is 3.46 percent, and the 10-year Treasury note yield is 4.20 percent. What are the appropriate loan rates for each firm?
Firm A loan rate= % Firm B loan rate= %
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