New York Investments (NYI),an investment banking firm,has proposed two types of payment plans for the IPO being considered by Albany Exploration.The first is a firm commitment of $36,000,000.The second is a best efforts arrangement in which NYI will receive $2.00 for every share sold up to a maximum of $2,400,000 for the 1,200,000 shares being offered.How much money will NYI earn under the best efforts method if it is able to sell only 90% of the offering at a price of $35.00 per share?

Question

Quizplus · Accepted Answer

Under the best efforts arrangement, NYI earns $2.00 for every share sold. If 90% of the 1,200,000 shares are sold, that's 1,080,000 shares (90% of 1,200,000). At $2.00 per share, NYI earns 1,080,000 shares * $2.00/share = $2,160,000.

New York Investments (NYI),an Investment Banking Firm,has Proposed Two Types