Becker Brothers is the managing underwriter for a 1.20-million-share issue by Ja

Question

Becker Brothers is the managing underwriter for a 1.20-million-share issue by Jay’s Hamburger Heaven. Becker Brothers is “handling” 10 percent of the issue. Its price is $22 per share and the price to the public is $23.75.   
    Becker also provides the market stabilization function. During the issuance, the market for the stock turned soft, and Becker is forced to purchase 60,000 shares in the open market at an average price of $22.50. They later sell the shares at an average value of $22.25.

Compute Becker Brothers’ overall gain or loss from managing the issue. (Do not round intermediate calculations and round your answer to the nearest whole dollar.)

Becker Brothers is the managing underwriter for a 1.20-million-share issue by Jay’s Hamburger Heaven. Becker Brothers is “handling” 10 percent of the issue. Its price is $22 per share and the price to the public is $23.75.   
    Becker also provides the market stabilization function. During the issuance, the market for the stock turned soft, and Becker is forced to purchase 60,000 shares in the open market at an average price of $22.50. They later sell the shares at an average value of $22.25.

Explanation / Answer

P=22.50

S= 22.25

N = 60,000

Profit (loss)= n x(S-P)

                Loss        =60,000 x(22.25-22.50)

                loss        =15000

they had a loss of 15,000 from the issue.

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