The following information applies for parts d), e) and f). A company makes an initial public offering of shares to raise $240 million, at an offer price of $8 per share. The issue is underwritten at $7.60. The costs of preparing the prospectus, legal fees, ASIC registration and other administrative costs add up to $700,000. The firms share price closes at $8.70 on its first day of trade. Two years later, the company wants to finance a new investment project costing $36 million. It will do this through a seasoned equity offering at $54 per share, and the underwriter charges a 7% spread.

d)Calculate the IPO underwriting spread.

e) Calculate the IPO underpricing. (1 mark)

f) How many shares have to be issued through the SEO?

g) Discuss two advantages for firms to raise capital through seasoned equity offerings, as compared with an IPO.