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Viktor [21]
3 years ago
12

DRK, Inc., has just sold 110,000 shares in an initial public offering. The underwriter’s explicit fees were $66,000. The offerin

g price for the shares was $60, but immediately upon issue, the share price jumped to $66.00. a. What is the total cost to DRK of the equity issue?
Business
1 answer:
iris [78.8K]3 years ago
4 0

Answer: $726000

Explanation:

Based on the information given in the question, the total cost to DRK of the equity issue will be calculated thus:

Firstly, we'll calculate the implicit cost per share which will be:

= Increased price - Offering price

= $66 - $60

= $6

Then, the total implicit cost will be:

= $6 × 110000

= $660000

Then, the total cost to DRK of the equity issue will be:

= Explicit cost + Implicit cost

= $66000 + $660000

= $726000

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