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A firm desires to sell stock to the public. The underwriter charges $0.45 million in fees and offers to buy six million shares from the firm at a price of $35 per share. In addition,registration and audit fees total $130,000,and marketing and miscellaneous fees add up to another $75,000. The underwriter expects to earn gross proceeds per share of $38. What is the issuing firm's out-of-pocket dollar transaction cost to issue the stock? Immediately after the stock was issued,the stock price rose to $40. What is the issuing firm's opportunity cost? What is the total issuance cost,including opportunity costs,as a percentage of the total funds available to the issuing firm?
Swap Dealer
An individual or entity that acts as a counterparty in swap agreements, often in the derivatives and commodities markets.
Commercial Bank
A financial institution that offers services such as accepting deposits, providing business loans, and offering basic investment products.
Over The Counter
A decentralized market, without a central physical location, where traders conduct securities transactions directly between two parties without the supervision of an exchange.
Perfect Hedge
A perfect hedge is an investment position that completely eliminates the risk of another investment through a counterbalancing act, typically through derivatives like options or futures contracts.
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