DRK, Inc., has just sold 230,000 shares in an initial public offering. The underwriter’s explicit fees were $138,000. The offering price for the shares was $34, but immediately upon issue, the share price jumped to $34.50.
a. What is the total cost to DRK of the equity issue?
Total cost $
b. Is the entire cost of the underwriting a source of profit to the underwriters?
Yes
No