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Profit or Loss on New Stock Issue Security Brokers Inc. specializes in underwriting new issues by small firms. On a recent offering of Beedles Inc.,
Profit or Loss on New Stock Issue
Security Brokers Inc. specializes in underwriting new issues by small firms. On a recent offering of Beedles Inc., the terms were as 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 the design and distribution of the issue were $480,000. What profit or loss would Security Brokers incur if the issue were sold to the public at the following average price?
- $4.5 per share? Use minus sign to enter loss, if any. ($980,000)
- $5.75 per share? Use minus sign to enter loss, if any. $2,770,000
- $3.5 per share? Use minus sign to enter loss, if any. ($3,980,000)
Answer is in bold. Is this correct?
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