security brokers inc specializes in underwriting new issues by small firms. on a

Question

security brokers inc specializes in underwriting new issues by small firms. on a recent offering of beedles inc, the term were a follows

price $5 per shares

number of shares 3 million

proceeds to beedles $14,000,000

the out of pocket expenses incurred by security brokers in the design and distribution of the issue were 300,000. what is the profit or loss would security brokers incur if the issue were sold to the public at the following average price?

a $5 per share

b' $6 per share'

c $4 per share

Explanation / Answer

a. $5 per share

($5 x 3 mil shares = $15 mil -14 mil proceeds to Bettles, Inc. - $300k Out ofPocket expenses = $700,000b.

b. $6 per share

($6 x 3 mil shares = $18 mil -14 mil proceeds to Bettles, Inc. - $300k Out ofPocket expenses = $3,700,000

c.$4 per share

($4 x 3 mil shares = $12 mil -14 mil proceeds to Bettles, Inc. - $300k Out ofPocket expenses = -$2,300,000

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