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7 November, 04:04

Security Brokers Inc. specializes in underwriting new issues by small firms. On a recent offering of Beedles Inc., the terms were as follows: Price to public: $5 per share Number of shares: 3 million Proceeds to Beedles: $14,000,000 The out-of-pocket expenses incurred by Security Brokers in the design and distribution of the issue were $430,000. What profit or loss would Security Brokers incur if the issue were sold to the public at the following average price? $4.75 per share? Use minus sign to enter loss, if any. $ $5.75 per share? Use minus sign to enter loss, if any. $ $4 per share? Use minus sign to enter loss, if any. $

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  1. 7 November, 04:17
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    a) - $180,000

    b) $2,820,000

    c) - $2,430,000

    Explanation:

    a) To calculate the profit or loss that the Security Brokers would incur if the issue were sold to the public at $4.75 per share, we have the following:

    = (number of shares * price to public) - (proceeds to Beedles) - (out of pocket expenses)

    = (3,000,000 * 4.75) - (14,000,000) - (430,000)

    = - $180,000

    The loss at $4.75 per share is $180,000

    b) To calculate the profit or loss that the Security Brokers would incur if the issue were sold to the public at $5.75 per share, we have the following:

    = (number of shares * price to public) - (proceeds to Beedles) - (out of pocket expenses)

    = (3,000,000 * 5.75) - (14,000,000) - (430,000)

    = $2,820,000

    The profit at $5.75 per share is $2,820,000

    c) To calculate the profit or loss that the Security Brokers would incur if the issue were sold to the public at $4 per share, we have the following:

    = (number of shares * price to public) - (proceeds to Beedles) - (out of pocket expenses)

    = (3,000,000 * 4) - (14,000,000) - (430,000)

    = - $2,430,000

    The loss at $4 per share is $2,430,000
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