Problem 18-01

Profit or Loss on New Stock Issue

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 $280,000. What profit or loss would Security Brokers incur if the issue were sold to the public at the following average price?

a.$5.5 per share? Use minus sign to enter loss, if any.

$

b.$5.75 per share? Use minus sign to enter loss, if any.

$

c.$4.25 per share? Use minus sign to enter loss, if any.

$