Parafoil Avionics sells 50 million shares 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 shares were 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?

Question

Quizplus · Accepted Answer

The existing investors sold 10 million shares at $12.50 each. The gross proceeds from this sale are 10 million * $12.50 = $125 million. The underwriter's fee is 5% of $125 million, which is $125 million * 0.05 = $6.25 million. Therefore, the net amount for existing investors is $125 million - $6.25 million = $118.75 million.

Parafoil Avionics Sells 50 Million Shares in an SEO -