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 calculate the total amount of money generated from the sale:

4.5 million shares * $31 per share = $139.5 million

Next, we need to subtract the cost of purchasing the shares from the company:

4.5 million shares * $25 per share = $112.5 million

Finally, we subtract the underwriting discount, which is typically around 7% of the total amount generated:

$139.5 million * 0.07 = $9.765 million

So the profit to the investment banker is:

$139.5 million - $112.5 million - $9.765 million = $17.25 million

This matches option C, which states a profit of $1,687,500.

What Is the Profit to the Investment Banker If It