A. Ocean Gas is a private firm and has 10 million shares outstanding. The company has planned for its initial public offering (IPO). The IPO price has been set at $30 per share, and the underwriting spread is 7%. The IPO is a big success. The number of shares sold in the primary offering is 8 million shares and the number of shares sold in the secondary offering is 6 million shares. The share price rises to $50 on the first day of trading.

(i) How much did Ocean Gas raise through this IPO?

(ii) Explain whether there is any underpricing situation in this IPO.

(iii) Assume that the post-IPO value of Ocean Gas is its fair market value. Suppose Ocean Gas could have issued shares directly to investors at their fair market value, in a perfect market with no underwriting spread and no underpricing. Assuming that Ocean Gas could raise the same amount of funds that it would have with the investment banker handling the underwriting, what is the share price in this case? How many new shares would Ocean Gas issue?