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Question
West Coast Manufacturing Company (WCMC) is executing an initial public offering with the following characteristics.
The company will sell 15 million shares at an offer price of $20 per share, the underwriter will charge a 10% underwriting fee, and the shares are expected to sell for $29 per share by the end of the first day's trading. Assume that this IPO is executed as anticipated.
1. Calculate the initial return earned by investors who are allocated shares in the IPO. Round your answer to nearest whole percent. _________%
2. How much will WCMC receive from this offering (i.e., net proceeds to the issuer)? $ ________ million
3. What is the total cost (underwriting fee and underpricing) of this issue to WCMC? $ ________ million
How many plates in each category should the company produce to maximize their weekly profit?
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