An investment banker agrees to underwrite an issue of 10 million shares of stock for Rochester Industries on a best-efforts basis. The investment banker is able to sell 8 million shares for $10.50 per share, and it charges Rochester Industries $0.225 per share sold. How much money does Rochester Industries receive?

Question

Quizplus · Accepted Answer

Rochester Industries receives $82,200,000. The investment banker sells 8 million shares at $10.50 each, totaling $84,000,000. The banker charges $0.225 per share, so the fee is 8,000,000 * $0.225 = $1,800,000. Therefore, Rochester Industries receives $84,000,000 - $1,800,000 = $82,200,000.

An Investment Banker Agrees to Underwrite an Issue of 10