Question: 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

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 $390,000. What profit or loss would Security Brokers incur if the issue were sold to the public at the following average price?

  1. $5.5 per share? Use minus sign to enter loss, if any. $
  2. $6.25 per share? Use minus sign to enter loss, if any. $
  3. $4 per share? Use minus sign to enter loss, if any. $

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