1. Video Games, Inc., with the help of its investment bank recently issued 10.05 million shares of new stock. The offer price on the stock was $47.75 per share and Video's received a total of $451,500,000 through this stock offering. Calculate the net proceeds and the underwriter's spread on the stock offering. What percentage of the gross price is the investment bank charging Video for underwriting the stock issue? (Round your intermediate calculations and final answer to 2 decimal places.)
8.73%
5.91%
29.55%
2.82%
2. You have a chance to purchase a perpetual security that has a stated annual payment (cash flow) of $50. However, this is an unusual security in that the payment will increase at an annual rate of 5 percent per year; this increase is designed to help you keep up with inflation. The next payment to be received (your first payment, due in 1 year) will be $52.50. If your required rate of return is 15 percent, how much should you be willing to pay for this security? Please show work.
A 525
B 482
C 610
D 556
E 350