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Part 1

RoundtreeRoundtree 

Software is going public using an auction IPO. The firm has received the following​ bids: 

LOADING...

. 

Assuming 

RoundtreeRoundtree 

would like to sell 

2.062.06 

million shares in its​ IPO, what will be the winning auction offer​ price?

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Part 1

The price will be 

​$enter your response here 

per share. ​ (Round to the nearest​ cent.)  Price ($)	Number of Shares

14.40	100,000

14.20	240,000

14.00	520,000

13.80	1,200,000

13.60	1,220,000

13.40	820,000

13.20	440,000

In an auction IPO, the company sells shares at the highest price that allows it to sell all the shares it intends to. This price is called the "clearing price," which is determined based on the total demand for shares.

To find the winning auction offer price, we need to accumulate the bids starting from the highest bid until the total number of shares reaches or exceeds the 2.06 million shares that Roundtree wants to sell.

Let's work through the bids:

| Price   | Number of Shares | Cumulative Shares |
|---------|------------------|-------------------|
| $14.40  | 100,000           | 100,000           |
| $14.20  | 240,000           | 340,000           |
| $14.00  | 520,000           | 860,000           |
| $13.80  | 1,200,000         | 2,060,000         |

At the price of **$13.80**, the cumulative total reaches 2.06 million shares, exactly matching the number of shares that Roundtree wants to sell. Therefore, the winning auction price is **$13.80 per share**.

Would you like a detailed explanation of how auction IPOs work or have any other questions?

Here are five related questions you might find useful:

1. How do companies benefit from using an auction IPO?
2. What are the risks for investors in an auction IPO?
3. How does the auction IPO process differ from traditional IPOs?
4. What happens if demand for shares exceeds supply in an auction IPO?
5. How is the final allocation of shares determined among bidders?

**Tip:** In an auction IPO, the highest bids are always prioritized to maximize the selling price, ensuring the firm raises as much capital as possible.

Roundtree Software is going public using an auction IPO. The firm has received the following bids:

Assuming Roundtree would like to sell 2.06 million shares in its IPO, what will be the winning auction offer price?

Price ($)    Number of Shares
14.40        100,000
14.20        240,000
14.00        520,000
13.80        1,200,000
13.60        1,220,000
13.40        820,000
13.20        440,000

Learn how to determine the clearing price for Roundtree Software's IPO using auction bids. The problem involves calculating cumulative demand and selecting the price where total shares match the company's target. Key mathematical concepts include supply and demand, cumulative shares, and auction pricing mechanisms.

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