Q6(b)	(6 marks)
A company issues a $280 million IPO. The offer price is set to $10 per share. The underwriters spread is 8%.
The underwriter has agreed to a best-effort arrangement.
For issuing the IPO, the company will pay some admin costs. The admin costs include a legal fee of $50,000, an accountant fee of $35,000 and other admin costs amounting to $85,000. The companys share price increases by 5% at the end of the first day of trading.
i. Determine the companys total cost of issuing the securities..	(2 marks)
ii. Determine proceeds available to the underwriter and to the issuer if 92% of the shares are sold.	(1 mark)
iii. Who bears more risk under the current arrangement? The underwriter or the issuer? Why?	(1 mark)
iv. How will the proceeds available to the issuer and to the underwriter change for a stand-by arrangement?	(2 marks)