Use the Table for the Question(s)below

question 96

Multiple Choice

Use the table for the question(s) below.
David founds a company and goes through the investment rounds shown below:
He decides to take the company public through an IPO,issuing 2 million new shares.Assuming that he successfully completes the IPO,the net income for the next year is estimated to be $8 million.His banker informs him that the price of shares should be set using average price-earnings ratios for similar businesses,which is 15.0.
-An IPO is offered at $12.50 per share for 4 million shares.The IPO underwriters had a spread of 6.5%.What was the total fee paid to the underwriters?

• A)$3.25 million
• B)$4 million
• C)$260,000
• D)$2.25 million
• E)$12.5 million

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Definitions:

Equipment Installation

The process of setting up and configuring machinery or equipment for use in its intended operational environment.

Goodwill

An intangible asset that represents the value of a company's brand name, customer relationships, and other non-physical assets that contribute to earnings.

Patent

A legal right granted to an inventor or assignee to exclude others from making, using, or selling an invention for a certain number of years.

Copyright

A legal right granted to an author, composer, playwright, publisher, or distributor to exclusive publication, production, sale, or distribution of their original work.