Parafoil Avionics sells 50 million shares of stock in an SEO 40 million being primary shares issued by the company and 10 million being secondary shares sold by investors in the company.At the time of the sale,Parafoil's stock was selling at $12.50 per share.If the underwriter charges 5% of the gross proceeds as a fee,how much money was raised in the sale?

Question

Quizplus · Accepted Answer

The total proceeds from the sale are 50 million shares * $12.50 = $625 million. The underwriter's fee is 5% of $625 million, which is $31.25 million. Therefore, the net amount raised is $625 million - $31.25 million = $593.75 million, which rounds to $594 million. However, the question asks for the gross proceeds, which is $625 million, but the correct choice for the net proceeds is $594 million.

Parafoil Avionics Sells 50 Million Shares of Stock in an SEO