FBN Inc. has just sold 100,000 shares in an initial public offering. The underwriters explicit fees were

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FBN Inc. has just sold 100,000 shares in an initial public offering. The underwriter’s explicit fees were $70,000. The offering price for the shares was $50, but immediately upon issue, the share price jumped to $53.

a. What is your best estimate of the total cost to FBN of the equity issue?

b. Is the entire cost of the underwriting a source of profit to the underwriters? P-968

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ISE Investments

ISBN: 9781266085963

13th International Edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus

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