Braynerd Chemicals sells 40 million shares in an SEO - 35 million being primary shares issued bythe company and 5 million being secondary shares sold by investors in the company. At the time of the sale, Braynerd's shares were selling at $22.50 per share. If the underwriter charges 6% of the gross proceeds as a fee, how much money was raised in the sale?

Question

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The total proceeds from the sale are 40 million shares * $22.50 = $900 million. The underwriter's fee is 6% of $900 million, which is $54 million. Therefore, the net amount raised is $900 million - $54 million = $846 million. However, since only the primary shares contribute to the money raised by the company, we calculate 35 million shares * $22.50 = $787.5 million. Subtracting the underwriter's fee from this gives $787.5 million - $47.25 million = $740.25 million.

Braynerd Chemicals Sells 40 Million Shares in an SEO -