How much market value is absorbed by the total cost

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Reference no: EM13290281

Assume the issuer incurs $1 million in other expenses to sell 3 million shares at $40 each to an underwriter and the underwriter sells the shares at $43 each. By the end of the first day's trading, the issuing company's stock price had risen to $70. In percentage terms, how much market value is absorbed by the total cost (direct expenses plus underpricing cost)?

a. 13.33%
b. 23.33%
c. 33.33%
d. 43.33%

 

Reference no: EM13290281

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