How much spread is necessary to cover the underwriter cost

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Reference no: EM13294955

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

Reference no: EM13294955

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