. In its negotiations with its investment bankers, Gold Co. has reached an agreement whereby the investment bankers receive a smaller fee now (8% of gross proceeds versus their normal 10%) but also receive a 3-years option to purchase an additional 150,000 shares at $10.00 per share. Gold Co. will go public by selling $10,000,000 of new common stock. The investment bankers expect to exercise the option and purchase the 150,000 shares in exactly three years, when the stock price is forecasted to be $13.50 per share. However, there is a chance that the stock price will actually be $20.00 per share three years from now. If the $20 price occurs, what would the present value of the entire underwriting compensation be? Assume that the investment bankers required return on such arrangements is 14%, and ignore taxes. *

$1,812,457

$2,223,357

$2,824,915

$3,024,915

None of the above