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

question 46

Multiple Choice

Use the following information to answer the question(s) below.
Nielson Motors sold 10 million shares of stock in an SEO.The market price of Nielson's stock at the time was $37.50.Of the 10 million shares sold,4 million shares were primary shares sold by the company,and the remaining 6 million shares were being sold by the venture capital investors.Assume the underwriter charges 4% of the gross proceeds as an underwriting fee which is shared proportionately between the primary and secondary shares.
-The amount of money the underwriter will earn on this transaction is closest to:

• A)$4 million.
• B)$6 million.
• C)$9 million.
• D)$15 million.

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Definitions:

Equity Method

An accounting technique used to assess the profits earned by investments in other companies, where the investment income is proportional to the ownership stake.

Common Stock

A type of equity security that represents ownership in a corporation, with holders entitled to vote on corporate matters and receive dividends.

Noncontrolling Interest

The equity in a subsidiary not attributable, directly or indirectly, to a parent company.

Equity Method

The Equity Method is an accounting technique used by firms to assess the profits earned through their investments in other companies, recording these profits as income from the investment.