The MEP company has issued 5,020,000 new shares. Its investment bank agrees to underwrite these shares...
The MEP company has issued 5,020,000 new shares. Its investment
bank agrees to underwrite these shares on a best efforts basis. The
investment bank is able to sell 4,220,000 shares for $56 per share.
It charges MEP $1.35 per share sold.
a. How much money does MEP receive? (Do
not round intermediate calculations. Enter your
answer in dollars, not in millions.)
b. What is the investment bank’s profit?
(Enter your answer in dollars, not in
millions.)
c. What is the stock price of MEP? (Enter
your answer in dollars, not in millions.)
Homework Answers
a)
Money received = (selling price - charge per share)*number of shares sold
= (56 - 1.35) * 4,220,000
= $230,623,000
b)
Investment banks profit = charge * number of shares sold
= 1.35 * 4,220,000
= $5,697,000
c)
Stock price = selling price to public = $56
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