Just Add Water, Inc., with the help of its investment bank recently issued $200,000,000 of new debt. The offer price on the debt was $1,000 per bond and the underwriter's spread was 4 percent of the gross proceeds. What amount of capital funding did Just Add Water raise through this bond issue?
A) $1,000
B) $8,000,000
C) $192,000,000
D) $200,000,000

Question

Quizplus · Accepted Answer

Just Add Water, Inc. raised $192,000,000 through this bond issue. The underwriter's spread was 4 percent of the gross proceeds ($200,000,000), which equals $8,000,000. Therefore, the amount raised is the gross proceeds minus the underwriter's spread: $200,000,000 - $8,000,000 = $192,000,000.