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The MEP company has issued 5,110,000 new shares. Its investment bank agrees to underwrite these shares...

The MEP company has issued 5,110,000 new shares. Its investment bank agrees to underwrite these shares on a best efforts basis. The investment bank is able to sell 4,310,000 shares for $55 per share. It charges MEP $1.80 per share sold. a. How much money does MEP receive? (Do not round intermediate calculations.) Amount received by MEP $ b. What is the investment bank’s profit? Investment bank’s profit $ c. What is the stock price of MEP? Stock price of MEP

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Answer #1

a. Money received by MEP = 4310000 * ($55 - $1.80)

= 4310000 * $53.2

= $229292000

b.Investment banks profit = $1.8 * 4310000 = $7758000

c. Stock price is the price at which the shares are sold by investment bank i.e. $55 per sahre

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