Question

Idle Time Gaming, Inc has reached a point in its life where it needs several million dollars in order to expand and follow its strategic plan. In negotiations with the investment banker, they agree to issue 40 million shares of common stock, at $22/share.If the Investment Banker's fee for underwriting the total sale is 6.82%, what is the discounted pricethat the investment bank is willing to pay Idle Time for the shares?
A. Approximately $300,000,000
B.Approximately $820,000,000
C. Approximately $ 880,000,000
D. Approximately $88,000

Answer 1

Answer:

Idle time investment bank willing to pay = $819,984,000

so here correct option is  B.Approximately $820,000,000

Explanation:

given data

common stock = 40 million shares

par share = $22

bank fees  = 6.82%

solution

we know that Revenue generated from sale is

Revenue generated = 40,000,000 × $22

Revenue generated  = $880,000,000

and

Banker fee = 880,000,000 × 0.0682

Banker fee = $60,016,000

so  

Idle time investment bank willing to pay will be

Idle time investment bank willing to pay = Revenue generated - Banker fee

Idle time investment bank willing to pay =$880,000,000 - $60,016,000

Idle time investment bank willing to pay = $819,984,000

so here correct option is  B.Approximately $820,000,000