Norman Internet Service Company (NISC) is interested in selling common stock to raise capital for capacity expansion. The firm has consulted First Tulsa Company, a large underwriting firm, which believes that the stock can be sold for $50 per share.
The underwriter's investigation found that its administrative costs will be 2.5 percent of the sale price, and its selling costs will be 2.0 percent of the sale price.
If the underwriter requires a profit, equal to 1 percent of the sale price, how much, in dollars, will the spread have to be to cover the underwriter's costs and profit?