What is the profit to the investment banker if it is able to sell 4.5 million shares for $31 per share?

Question

Quizplus · Accepted Answer

To find the profit, we need to first find the total revenue generated from the sale of 4.5 million shares at $31 per share:
Total Revenue = 4.5 million * $31 = $139.5 million
The investment banker's profit is a percentage of this revenue, which is called the underwriting spread. Let's assume the underwriting spread is 1.25%. Then, the investment banker's profit would be:
Profit = 1.25% * $139.5 million = $1,743,750
However, the question asks for the profit to the investment banker, not including any expenses. If we assume that the investment banker has expenses of $56,250 (4.5 million shares * $0.0125 per share), then the net profit would be:
Net Profit = $1,743,750 - $56,250 = $1,687,500
Therefore, the best choice is C.

What Is the Profit to the Investment Banker If It