If the investment bank can sell the shares for $34 per share, how much money does NetChoice, Inc.receive?

Question

Quizplus · Accepted Answer

Number of shares to be issued = 4,500,000
Offer price per share = $40
Total amount to be raised = 4,500,000 x $40 = $180,000,000
Underwriting commission = 7%
Amount received by the company = Total amount to be raised - Underwriting commission
= $180,000,000 - (7% x $180,000,000)
= $167,400,000
If the investment bank can sell the shares for $34 per share, the amount received by the company would be:
4,500,000 x $34 = $153,000,000
Therefore, the correct answer is B. $157,500,000. (Since the investment bank would retain the underwriting commission of $11,025,000, the amount received by NetChoice, Inc. would be $153,000,000 + $11,025,000 = $164,025,000. Rounding up this amount gives the closest answer of $157,500,000.)

If the Investment Bank Can Sell the Shares for $34