Question

an underwriter enters into a firm commitment to sell 1 million shares at 20 each including a 2 spread. how much does the issuing firm receive if only 500000 shares are sold

Answer 1

the issuing firm received is $9,000,000 or $9 million

Step-by-step explanation:

The computation of the issuing firm received is shown below;

= Number of shares sold × (sale price per share - spread)

= 500,000 shares × ($20 - $2)

= $500,000 shares × $18

= $9,000,000 or $9 million

Hence, the issuing firm received is $9,000,000 or $9 million

We simply applied the above formula so that the accurate value could come

And, the same is to be considered