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Oil company is planning to issue new shares in the stock market and the management contacted...

Oil company is planning to issue new shares in the stock market and the management contacted with various investment banks. In this regard, ABC Investment bank offer oil company following options for its IPO sales of equity;

  1. A best effort arrangement where ABC will keep $2 per share for each share sold
  2. A firm commitment arrangement of $20,000,000

oil company plans to issue 2000,000 shares at $11 per share to public, please analyze;

  1. In case only 100% shares are sold, which is better choice for oil company; which is better choice for ABC Investment Bank?
  2. In case only 88% shares are sold, which is better choice for oil company; which is better choice for ABC Investment Bank?

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 2 years ago
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