Tuttle Buildings Inc

question 10

Multiple Choice

Tuttle Buildings Inc. has decided to go public by selling $5,000,000 of new common stock. Its investment bankers agreed to take a smaller fee now (6% of gross proceeds versus their normal 10%) in exchange for a 1-year option to purchase an additional 200,000 shares at $5.00 per share. The investment bankers expect to exercise the option and purchase the 200,000 shares in exactly 1 year, when the stock price is forecasted to be $6.50 per share. However, there is a chance that the stock price will actually be $12.00 per share 1 year from now. If the $12 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.

• A) $1,300,973
• B) $1,369,446
• C) $1,441,522
• D) $1,517,391

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Definitions:

Human Culture

The complex whole that includes knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired by humans as members of society.

Fossil Primates

Fossil primates are the preserved remains or traces of ancient primate species, providing insights into the evolutionary history of primates, including humans.

Dryopithecines

An extinct group of primates believed to be ancestral to both modern apes and humans, dating from the Miocene epoch.

Australopithecus Afarensis

An early hominin species known for the famous "Lucy" fossil, living approximately 3.9 to 2.9 million years ago.