Your firm has 12 million shares outstanding, and you are about to issue 4 million new shares in an IPO. The IPO price has been set at $16 per share, and the underwriting spread is 8%. The IPO is a big success with investors, and the share price rises to $55 after the first day of trading. Assuming that the existing shareholders did not sell their shares at the IPO (still be the shareholders).

(i) How much did your firm raise from the IPO?

(ii) What is the market value of the firm after the IPO? (iii) What is the underpricing in percentage?

(iv) Explain who benefits from the IPO underpricing and who loses from the IPO underpricing.