Convex Incorporated sells 10 million shares in an SEO - 6 million being primary shares issued by the company and 4 million being secondary shares sold by investors in the company. At the time of the sale, Convex's shares were selling at $8.00. If the underwriter charges 6% 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 10 million shares * $8.00 = $80 million. The underwriter's fee is 6% of $80 million, which is $4.8 million. Therefore, the net amount raised is $80 million - $4.8 million = $75.2 million. However, only the primary shares (6 million) contribute to the money raised by the company, so the correct calculation is 6 million shares * $8.00 = $48 million, minus the underwriter's fee on the primary shares (6% of $48 million = $2.88 million), resulting in $45.12 million raised by the company.

Convex Incorporated Sells 10 Million Shares in an SEO -