An Investment Banker Agrees to Underwrite an Issue of 5

question 83

Multiple Choice

An investment banker agrees to underwrite an issue of 5 million shares of stock for NetChoice, Inc. on a firm commitment basis. The investment banker pays $31.50 per share to NetChoice, Inc. for the 5 million shares of stock. It then sells those shares to the public for $30.00 per share.
-If the investment bank can sell the shares for $34 per share,how much money does NetChoice,Inc.receive?

• A)$150,000,000.
• B)$157,500,000.
• C)$112,000,000.
• D)$125,000,000.

---

Definitions:

Conversion Cost

The combined cost of direct labor and manufacturing overheads incurred to convert raw materials into finished goods.

Direct Labor

The wages or salaries paid to workers directly involved in the production of goods or services.

Indirect Material Cost

Costs of materials that are part of the production process but are not directly traceable to a finished product.

Lubricants

Substances applied to reduce friction between surfaces in mutual contact, which ultimately decreases the heat generated when the surfaces move.