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Profit or Loss on New Stock Issue Security Brokers Inc. specializes in underwriting new issues by small...

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Finance

Profit or Loss on New Stock Issue

Security Brokers Inc. specializes in underwriting new issues bysmall firms. On a recent offering of Beedles Inc., the terms wereas follows:

Price to public:$5 per share
Number of shares:3 million
Proceeds to Beedles:$14,000,000

The out-of-pocket expenses incurred by Security Brokers in thedesign and distribution of the issue were $500,000. What profit orloss would Security Brokers incur if the issue were sold to thepublic at the following average price?

  1. $5.25 per share? Use minus sign to enter loss, if any.
    $
  2. $6.25 per share? Use minus sign to enter loss, if any.
    $
  3. $4 per share? Use minus sign to enter loss, if any.
    $

Answer & Explanation Solved by verified expert
3.6 Ratings (422 Votes)
a Average price per share received by underwriters 525 Total number of shares 3000000 Total proceeds to underwriter 5253000000 15750000 proceeds to beedles 14000000 Out of pocket expenses 500000 Profit or loss on Underwriting    See Answer
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Profit or Loss on New Stock IssueSecurity Brokers Inc. specializes in underwriting new issues bysmall firms. On a recent offering of Beedles Inc., the terms wereas follows:Price to public:$5 per shareNumber of shares:3 millionProceeds to Beedles:$14,000,000The out-of-pocket expenses incurred by Security Brokers in thedesign and distribution of the issue were $500,000. What profit orloss would Security Brokers incur if the issue were sold to thepublic at the following average price?$5.25 per share? Use minus sign to enter loss, if any.$$6.25 per share? Use minus sign to enter loss, if any.$$4 per share? Use minus sign to enter loss, if any.$

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