(solution) The cost of issuing securities can be broken down into the

(solution) The cost of issuing securities can be broken down into the

The cost of issuing securities can be broken down into the following main categories:

                           -Gross spread (or underwriting discount)

                           -Other direct expenses – filing fees, legal fees, etc.

                           -Indirect expenses – opportunity costs, such as management time spent working on the issue

                           -Abnormal returns – seasoned stock issue, the reduction in price when the announcement is made

                           -Underpricing – IPOs

-Green Shoe option – additional allotment of shares sold at offer price
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