Big Apple Investment Bankers offers Northern Diagnostics the following options on its initial public sale of equity:

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Big Apple Investment Bankers offers Northern Diagnostics the following options on its initial public sale of equity: (1) a best-efforts arrangement whereby Big Apple will keep 2 % of the retail sales or (2) a firm-commitment arrangement of $6,000,000. Lunar plans on offering 1,000,000 shares at $7.50 per share to the public. If 100% of the shares are sold, which is the better choice for Northern Diagnostics? Which is the better choice for Big Apple Investment Bankers? What is the break-even sales percentage for Northern Diagnostics (point of indifference) and what will each party receive at the break-even sales percentage?

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