Skiffertons , an investment banking firm has proposed two types of payment plans for the IPO being considered by Dakota Drilling, a manufacturer of oil drilling equipment. The first is a firm commitment of $5,000,000. The second is a best effort in which Skiffertons will receive $4.00 for every share sold up to a maximum of $2,000,000 for the 500,000 shares being offered. How much money will BB earn under the best efforts method if it is able to sell only 80% of the offering at a price of $30.00 per share?

Question

Quizplus · Accepted Answer

Under the best efforts method, Skiffertons earns $4.00 per share sold. If 80% of 500,000 shares are sold, that's 400,000 shares. Therefore, Skiffertons earns 400,000 shares * $4.00 = $1,600,000.

Skiffertons , an Investment Banking Firm Has Proposed Two Types