A best efforts IPO underwriting consisted of 2.0 million shares at an offer price of $24 a share. The underwriter's fee was set at 5.95%. How many shares were sold if the issuer received $39,900,000?
A)1,693,342 shares
B)1,838,243 shares
C)1,767,677 shares
D)2,346,300 shares
E)2,653,700 shares

Question

Quizplus · Accepted Answer

First, we need to calculate the total amount paid to the underwriter as a fee:

Underwriter's fee = 2,000,000 shares x $24/share x 5.95% = $2,856,000

The amount received by the issuer is calculated by subtracting the underwriter's fee from the total proceeds:

Amount received by issuer = $39,900,000 - $2,856,000 = $37,044,000

To determine the number of shares sold, we divide the amount received by the issuer by the offer price per share:

Number of shares sold = $37,044,000 ÷ $24/share = 1,543,500 shares

Therefore, the correct answer is option C (1,767,677 shares).

A Best Efforts IPO Underwriting Consisted of 2