Question

Nielson Motors sold 10 million shares of stock in an SEO. The market price of Nielson's stock at the time was $37.50. Of the 10 million shares sold, 4 million shares were primary shares sold by the company, and the remaining 6 million shares were being sold by the venture capital investors. Assume the underwriter charges 4% of the gross proceeds as an underwriting fee which is shared proportionately between the primary and secondary shares.
Required:
1. The amount of money raised by Nielson Motors is closest to ____________.
Group of answer choices:a. $144 millionb. $150 millionc. $216 milliond. $219 million

Answer 1

Answer:

a. $144 million

Explanation:

The computation of the amount of money raised is shown below:

But before that we have to find out the amount raised and underwriting fees which is given below:

Amount raised by company is

= 4 million × $37.5  

= $150 million

And,

underwriting fees is

= $150 million × 4%

= $6 million

So, amount raised by the company is

= $150 million - $6 million

= $144 million

We deduct the underwriting fees from the raised amount