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Calculate the initial return earned by investors

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Southland Manufacturing Company (SMC) is executing an initial public offering with the following characteristics. The company will sell 2 million shares at an offer price of $30 per share, the underwriter will charge a 6% underwriting fee, and the shares are expected to sell for $36 per share by the end of the first day's trading.

Assuming this IPO is executed as expected, answer the following:

Problem a) Calculate the initial return earned by investors who are allocated shares in the IPO.

Problem b) How much will SMC receive from this offering?

Problem c) What is the total cost (underwriting fee and under-pricing) of this issue to SMC?

Reference no: EM132808386

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