Firm commitment versus best efforts. Astro Investment Bankers offers Lunar Vacations the following options on its initial public sale of equity: (a) a best efforts arrangement whereby Astro will keep 2.5% of the retail sales or (b) a firm commitment arrangement of $10,000,000. Lunar plans on offering 1,000,000 shares at $12 per share to the public. If 100% of the shares are sold, which is the better choice for Lunar Vacations? Which is the better choice for Astro Investment Bankers?
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