How much does the investment banker receive

Reference no: EM13295983

An investment banker enters into a best efforts arrangement to try and sell 8 million shares of stock at $20 per share for Kemp Corporation. The investment banker incurs expenses of $1 million in floating the issue and the company incurs expenses of $750,000. The investment banker will receive 8 percent of the proceeds of the offering.

1. If the offering is successful and sells out at the expected price of $20, how much money will the company receive?

2. If the offering is successful and sells out at the expected price of $20, how much money will the investment banker receive?

3. If the offering is partially successful and 6 million shares are sold at a price of $15, how much does the company receive?

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

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

Reference no: EM13295983

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