Question

Idle Time Gaming, Inc., has reached the point where it needs several million dollars in order to expand and follow its strategic plan. In negotiations with the investment banker, they agree to issue 40 million shares of common stock, at $22/share. If the investment banker's fee for underwriting the total sale is 6.82%, what is the discounted price that the investment bank is willing to pay Idle Time for the shares

Answer 1

Answer:

The bank is wiling to pay "approximately $820,000,000".

Explanation:

As we know,

Earnings from selling of $22/start sharing $40 million shareholdings:

⇒ $40,000,000\times 22$

⇒ $$880,000,000$

Fee of banker at 6.82% will be:

⇒ $880,000,000\times 0.0682$

⇒ $$60,016,000$

Idle investment company willingness to spend on time will be:

⇒ $880,000,000-60,016,000$

⇒ $$819,984,000$

So that the bank is willing to pay "approximately $820,000,000".