Problem:
A firm is making an initial public offering. The investment bankers agree to a firm underwriting commitment of 500,000 shares priced to the public at $50 a share. The underwriter's spread is 12%. In addition, the underwriter charges $600,000 in legal fees. On the first day of trading, the firm's stock closed at $61.
Required:
Question: What were the total costs of the issue?
a.) $3,000,000
b.) $9,100,000
c.) $3,600,000
d.) $8,500,000
Note: Provide support for rationale.