Firm commitment versus best efforts. Astro Investment Bank offers Lunar Vacations the following options on its...
Firm commitment versus best efforts.
Astro Investment Bank offers Lunar Vacations the following options on its initial public sale of equity:
(a) a best efforts arrangement whereby Astro will keep 2.8% of the retail sales or (b) a firm commitment arrangement of $10,300,000. Lunar plans on offering
1,000,000 shares at $12.76 per share to the public. If it sells 100% of the shares, which is the better choice for Lunar Vacations? Which is the better choice for Astro Investment Bank?
Under the best efforts arrangement, what are the proceeds for Lunar Vacations?
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Firm commitment versus best efforts.
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What were the total proceeds from the common-stock sale?
Total proceeds
$
How much money did the company receive?
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$
How much money did the investment bank receive in fees?
Underwriting spread
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