Question

Braynerd Chemicals sells 40 million shares of stock in an SEO—25 million being primary shares issued by the company and 15 million being secondary shares sold by investors in the company. At the time of the sale, Braynerd's stock was selling at $21.00 per share. If the underwriter charges 5% of the gross proceeds as a fee, how much money was raised in the sale?

Answer 1

Answer:  $498.75‬ million

Explanation:

Of the 40 million shares sold by Braynerd Chemicals, 15 million were sold as secondary shares by investors in the company. The proceeds from these 15 million will therefore not go to the company but to the investors so they are not counted.

Gross total money raised will be;

= 25 million * 21.00

= $525 million

The Underwriter charges 5% of the gross amount as a fee so the Net amount raised will be;

Net Total = 525 * ( 1 - 5%)

Net Total = $498.75‬ million