Parafoil Avionics sells 50 million shares of stock in an SEO

Question

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 did existing investors in the company net from the sale?

Quizplus · Accepted Answer

Existing investors sold 10 million secondary shares at $12.50 each, totaling $125 million. After a 5% underwriter fee, they net 95% of $125 million, which is $118.75 million.