Game Guys, Inc. needs several million dollars in order to expand and become the international company that it says it wants to be in its strategic plan. After consulting with an investment banker who is willing to underwrite the issue, it learned that investors will purchase the stock for $32/share. Game Guys will receive a smaller amount for each share that is sold.

Question

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When an investment banker agrees to underwrite an IPO, it agrees to buy the entire issue at a discount. It will then sell the shares to interested investors for the full market price. The difference in the market price per share and the discount price per share is the amount that the investment banker keeps as payment for its services.