Use the Following Information to Answer the Question(s) Below

question 12

Multiple Choice

Use the following information to answer the question(s) below.
Wyatt Oil has 8 million shares outstanding and is about to issue 10 million new shares in an IPO. The IPO price has been set at $15 per share, and the underwriting spread is 6%. The IPO is a big success with investors, and the share price rises to $35 the first day of trading.
-The amount that Wyatt Oil pays as an underwriting spread closest to:

• A) $6 million
• B) $7 million
• C) $9 million
• D) $17 million
• E) $21 million

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Definitions:

Profit Centers

Divisions or branches of a business that are treated as separate entities for profit calculation and management purposes.

Discretion

The freedom to decide what should be done in a particular situation, often within certain guidelines or rules.

Performance Evaluation

The process of assessing the effectiveness, efficiency, and productivity of an individual, group, or entity.

Cost Center

A department or segment within an organization that does not directly contribute to profit but incurs costs.