Question: Batman Enterprises has just completed an initial public offering. The firm sold 2,700,000 new shares at an offer price of $17.50 per share. The underwritering

Batman Enterprises has just completed an initial public offering. The firm sold 2,700,000 new shares at an offer price of $17.50 per share. The underwritering

spread was $0.87 a share. The firm incurred $325,000 in legal, administrative, and other costs.

Suppose that on the first day of trading, the price of Batman's stock is $21.50 per share. What is the cost to the firm from the underpricing?

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