House Mountain Breweries (HMB) is planning an IPO. Its underwriters have said that the stock will sell at $25 per share. The direct costs (legal, printing, etc.) will be $750,00. The underwriters will charge a 7 percent spread.
a) How many shares must HMB sell to net $30 million?
b) If the stock price closes the first day at $27, how much has HMB left on the table?
c) What are HMB’s total costs (direct, indirect, and underwriting) for the IPO?