1. Your firm has 15 million shares outstanding, and you are about to issue 7 million new shares in an IPO. The IPO price has been set at $25 per share, and the underwriting spread is 7%. The IPO is a big success with investors, and the underpricing on the first day of trading is 75%. (5 marks)
2. 1. How much did your firm raise from the IPO and what is the market value of the firm after the IPO? (1.5 marks)
   2. Assume that the post-IPO value of your firm is its fair market value. Suppose your firm could have issued shares directly to investors at their fair market value, in a perfect market with no underwriting spread and no underpricing. What would the share price have been in this case, if you raise the same amount as in part (a)? (2 marks)
   3. Comparing part (a) and part (b), what is the total cost to the firms original investors due to market imperfections from the IPO? (1.5 marks)