Problem 8 Question: Assume Fisher Food Products is thinking about three different size offerings for the issuance of additional shares.

Size of Order Public Price Net to Corporation
a. $ 1.6 million . $40 $36.70
b. $ 6.0 million $40 $37.28
c. $25.0 million .. $40 $38.12

What is the percentage underwriting spread for each size offer What principle does this demonstrate

Problem 14 Question: Winston Sporting Goods is considering a public offering of common stock. Its investment banker has informed the company that the retail price will be $18per share for 600,000 shares. The company will receive $16.50 per share and will incur $150,000 in regristration

a. What is the spread on this issue in percentage terms What are the total expenses of the issue as a percentage of total value (at retail)

b. If the firm wanted to net $18 million from this issue, how many shares must be sold

Question: The management of Mitchell Labs decided to go private in 2002 by buying in all 3 million of its outstanding shares at $19.50 per share. By 2006, management had restructured the company by selling of the petroleum research division for $13 million, the fiber technology division for $9.5 million, and the synthetic products division for $21 million Because these divisions had been only marginally profitable, Mitchell Labs is a stronger company after the restructuring. Mitchell is now able to concentrate exclusively on contract research and will generate earnings per share of $1.25 this year. Investment bankers have contracted the firm and indicated that if it reentered the public market , the 3 million shares it purchased to go private could now be reissuedto the public at a P/E ratio of 16 times earnings per share.

a. What was the initial cost of Mitchell Labs to go private?

b. What is the total value of the company from (1) the proceeds of the divisions that were sold, as well as (2) the current value of the 3 million shares(based on current earningsand a

c. What is the percentage return to the management of Mitchell Labs from the restructuring Use answers from parts a and b to determine this value.