Yore Brewing Company went public five years ago with an issuance
of 5 million shares which, as of yesterday, were trading at $51.13
per share. They are looking to raise capital to start up a chain of
brewpubs in California by issuing an additional 1.0 million shares
tomorrow in a Seasoned Equity Offering (SEO).
Management expects the current publicly traded shares to drop 2.5%
at tomorrow's offering and remain at that price after the offering.
However their investment bank, hoping for a fully subscribed
offering, has suggested an offer price of $49.11 for those
investors allocated shares from the SEO (i.e. there will likely be
underpricing). The investment banker intends to charge a 7% spread
for a firm commitment underwriting of the issue and $250,000 in
legal and registration fees. The management team also estimates
that at least one month's worth of the CFO's available man-hours
were dedicated to preparing the offering and the CFO currently
earns $120,000 per year.
What is the total dollar amount of expenses (direct and indirect)
associated with Yore Brewing Company's SEO?
ANSWER
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