An investment banker enters into best efforts arrangement

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Reference no: EM131595195

An investment banker enters into a best efforts arrangement to try and sell 5 million shares of stock at $18 per share for Currie Corporation. The investment banker incurs expenses of $2.5 million in floating the issue while the company incurs expenses of $1 million. The investment banker will receive 7 percent of the proceeds of the offering.

a. If the offering is successful and sells out at the expected price of $18, how much money will the company receive?

b. If the offering is successful and sells out at the expected price of $18, how much money will the investment banker receive?

c. If the offering is partially successful and 4 million shares are sold at a price of $12, how much does the company receive?

d. Same facts as part c. How much does the investment banker receive?

e. Who bears more risk with a best efforts deal, the company or the investment banker? Why?

Reference no: EM131595195

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