Phase 4 DB - Apex Printing, Inc.

Phase 4 DB - Apex Printing, Inc.

Introduction

The paper aims at evaluating the new investment decision of Apex Printing, Inc. In the light of the given scenario, the paper attempts to evaluate the cost of equity issuance to the firm. The paper highlights advantages and disadvantages of engaging in the fund raising process. Keeping in view the SEC requirements, the paper identifies two primary compliance requirements, which are essential to be fulfilled by Apex Printing.

Cost of Issuing Equity

A typical IPO procedure is comprised of three phases that include the evaluation of pre and post-effects of IPO (figure 1). Analysis of the US market shows an improving trend on the use of IPO with a growing trend of successful IPO completion (figure 2). Since the arrival of SOX Act 2002, numerous reforms have been brought in the SEC laws of compliance that govern and regulate the procedure of going public and being public.

Figure 1: Timeline for IPO (PWC, 2012, p. 4)

Figure 2: Statistics on IPO Offerings (Allison et. al., 2008, p. 5)

Cost of equity can be comprised of several direct and indirect elements of the procedure. Cost of issuing equity for Apex has been calculated on the basis of average market trends and size of successful IPOs.

Apex Printing, Inc.

 

 

Funds Requirement

5,000,000

 

 

Overall Expenses

1,062,500

Underwriter's discount

150,000

Legal and Accounts Fees

5,000

External auditor Fee

7,500

Financial reporting advisor

500,000

Registration

75,000

Printing and Documentation

100,000

Listing Fees

125,000

Road show and advertising

100,000

 

 

# of Shares

100,000

 

 

Cost of IPO per share

39.38

Table 1: Cost of Issuing Equity for Apex

Advantages and Disadvantages of Initial Public Offering (IPO)

According to Morgan (2013), IPO may provide considerable infusion of cash into a firm. In the present case, Apex may use these funds for a variety of purposes, as ...