Question
A company needs to raise $20 million (This is the gross amount required by the company.) from a share offering. The shares are underwritten at
A company needs to raise $20 million (This is the gross amount required by the company.) from a share offering. The shares are underwritten at a fee of 6% of the total amount raised. The underwriter offers best-effort underwriting. Answer the following questions ignoring all other costs in the share offering.
a)
If the company receives subscription for 100% of the total shares offered, calculate how much the company would receive from the share offering.
The company would receive $------
b) If the company only receives subscription for 96.5% of the total shares offered, calculate how much the company would receive from the share offering.
The company would receive $----
c)If the company only receives subscriptions for 96.5% of the total shares offered, calculate how much the underwriter would receive from the share offering.
The underwriter would receive $-----
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Bankers Handbook On Credit Management
Authors: Indian Institute Of Banking & Finance
1st Edition
9387957853, 978-9387957855
