Issue and daycare incurs expenses
Course:- Business Economics
Reference No.:- EM132281363

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Moore investments enters into a best-efforts arrangement to sell 10M shares of stock at $18 per share for Daycare Inc. More incurs expenses of $1M in floating the issue and Daycare incurs expenses of $850K. Moore will receive 10% of the proceeds of the offering. If the offering yields only 5M shares sold at $10 per share, which is true:

  • Moore suffers a loss of $117M
  • Daycare incurs a cost of $5.85M
  • Moore earns a profit of $4M
  • Moore could have reduced its business risk had it chosen to underwrite the issue

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