Selling common stock to raise capital for capacity expansion

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Norman Internet Service Company (NISC) is interested in selling common stock to raise capital for capacity expansion. The firm has consulted First Tulsa Company, a large underwriting firm, which believes that the stock can be sold for $50 per share. The underwriter’s investigation found that its administrative costs will be 2.5% of the sale price and its selling cost 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: EM13772637

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