Apple has a IPO coming up with the following details. Apple will sell 300 million shares at an offer price of $25 per share. The underwriter will charge a 5% underwriting fee and shares expect to sell for $30 a share after the end of the first days trading.

1. If the IPO happens, calculate the initial returns earned by the investors allocated shares in the IPO.

2. How much will Apple receive from the IPO?

3. What is the total cost (underwriting and underpricing) of the issue to Apple?

4. As an investor, you buy Apple shares at the post offering market price of $30 and hold for year. You the sell the shares for $35 a share. Assume Apple doesn't pay dividends and no taxes. What net return did you earn on your investment?