An underwriter follows a best efforts basis to sell 2 million shares at $10 each.Such a public offering price has included a $1 spread.How much will the issuer receive if only 1.5 million shares are sold in this issue?
A)$20.0 million
B)$18.0 million
C)$15.0 million
D)$13.5 million

Question

Quizplus · Accepted Answer

If only 1.5 million shares are sold at the $10 offering price, the total proceeds would be 1.5 million x $10 = $15 million. However, the $1 spread would be deducted from the proceeds first, which would leave the issuer with $15 million - (1.5 million x $1) = $13.5 million. Therefore, the correct answer is D.

An Underwriter Follows a Best Efforts Basis to Sell 2