Renee's Boutique, Inc., needs to raise $300 million to finance firm expansion. In discussions with its investment bank, Renee's Boutique learns that the bankers recommend a debt issue with an offer price of $1,000 per bond and they will charge an underwriter's spread of 7.125 percent of the gross price. How many bonds will Renee's Boutique need to sell in order to receive the $300 million they need?

Question

Quizplus · Accepted Answer

To find the number of bonds needed, calculate the net proceeds per bond by subtracting the underwriter's spread from the offer price: $1,000 - ($1,000 * 0.07125) = $928.75. Then, divide the total amount needed by the net proceeds per bond: $300,000,000 / $928.75 ≈ 323,015.