Question: Green Lantern Enterprises has just completed an initial public offering. The firm sold 3,800,000 new shares at an offerprice of$10.50 per share.Theunderwriting spreadwas$0.86 a share.

Green Lantern Enterprises has just completed an initial public offering. The firm sold 3,800,000 new shares at an offerprice of$10.50 per share.Theunderwriting spreadwas$0.86 a share. The firm incurred $375,000 in legal, administrative, and other costs. The cost to the firm of the underwriting spread is 3,268,000. Suppose that on the first day of trading, the price of Green Lantern's stock is $14.10 per share. What is the cost to the firm from the underpricing?

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