LaJolla Securities Inc. specializes in the underwriting of small companies. The

Question

LaJolla Securities Inc. specializes in the underwriting of small companies. The terms of a recent offering were as follows:

LaJolla Securities' expenses associated with the offering were $800,000. Determine LaJolla Securities' profit on the offering if the secondary market price of the shares immediately after the offering began were as follows:

$21 per share
$ _____million

$25 per share

$ _____million

$30 per share

$ _____million

Number of shares 2.5 million Offering price $25 per share Net proceeds $38 million

Explanation / Answer

profit =190000000-800000=189200000 or $189.2mill

No. of shares price per share total price of shares 2.5 21 $52.5mill 2.5 25 $62.5mill 2.5 30 $75mill total $190mill

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