DRK, Inc., has just sold 70,000 shares in an initial public offering. The underwriters explicit fees were $42,000. The offering price for the shares was $66, but immediately upon issue, the share price jumped to $69.00.

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