Assume the Issuer Incurs $1 Million in Other Expenses to Sell

question 97

Multiple Choice

Assume the issuer incurs $1 million in other expenses to sell 3 million shares at $40 each to an underwriter and the underwriter sells the shares at $43 each.By the end of the first day's trading,the issuing company's stock price had risen to $70.What is the cost of underpricing?

• A) $81 million
• B) $91 million
• C) $101 million
• D) $111 million

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Definitions:

Categorical Syllogism

A form of deductive reasoning consisting of a major premise, a minor premise, and a conclusion, based on relationships between categories.

Syllogism Forms

Structured arguments using three propositions: two premises followed by a conclusion, based on deductive reasoning to infer a relationship between items.

Syllogism Form

A logical argument that applies deductive reasoning to arrive at a conclusion based on two or more premises that are asserted to be true.

Syllogism Validity

The property of a syllogism whereby if the premises are true, the conclusion cannot logically be false.