Please type the answer 3 Spartans Investment House is an und

3. Spartans Investment House is an underwriting firm to underwrite an issue of 7.5 million shares of stock for MyFace, a private social media firm looking to go public. specializing in initial public offerings (IPOs). Spartans is hired a. Spartans agrees to underwrite the stock on a firm commitment basis, paying $8.75 per share for 7.5 million shares i. If the IPO price is $9.50, how much capital does MyFace raise? How much profit (or loss) does Spartans earn? (2 points) ii. If the IPO price is $7.95, how much capital does MyFace raise? How much profit (or loss) does Spartans earn? (2 points)

Solution

3) a) i) Capital raised by MyFace = 7.5 million* $8.75 = $              65.625 million Profit (revenue) earned by Spartan = 7.5 million * ($9.50-$8.75) = $                5.625 million ii) Capital raised by MyFace = 7.5 million* $7.95 = $              59.625 million Profit (revenue) earned by Spartan = 7.5 million * ($9.50-$7.95) = $              11.625 million