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DRK, Inc., has just sold 200,000 shares in an initial public offering. The underwriters explicit fees were $120,000. The offering price for the shares was

DRK, Inc., has just sold 200,000 shares in an initial public offering. The underwriters explicit fees were $120,000. The offering price for the shares was $42, but immediately upon issue, the share price jumped to $45.50.

a. What is the total cost to DRK of the equity issue?

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

  • Yes

  • No

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