In its negotiations with its investment bankers, GoodSound Electronics has reached an agreement whereby the investment bankers receive a smaller fee now (4% of gross proceeds versus their normal 7%) but also receive a 1-year option to purchase an additional 200,000 shares at $5.00 per share. GoodSound will go public by selling 1,300,000 shares of new common stock at $5.00 per share. The investment bankers expect to exercise the option and purchase the 200,000 shares in exactly one year, when the stock price is conservatively forecasted to be $6.50 per share. However, there is a good chance that the stock price will actually be $10.00 per share one year from now. If the $10 price occurs, what would the present value of the entire underwriting compensation be? Assume that the investment banker's required return on such arrangements is 15%, and ignore taxes.

Group of answer choices

$909,565

$868,696

$648,696

$1,129,565