Bailey's Dog Pens, Inc., with the help of its investment bank recently issued $165,500,000 of new debt. The offer price on the debt was $1,000 per bond and the underwriter's spread was 7 percent of the gross proceeds. Calculate the amount of capital funding Bailey's Dog Pens, Inc., raised through this bond issue.

Question

Quizplus · Accepted Answer

The amount of capital funding raised can be calculated as follows:

Net Proceeds = Gross Proceeds - Underwriter's Spread
Underwriter's Spread = 7% of $165,500,000 = $11,585,000
Gross Proceeds = $165,500,000
Net Proceeds = $165,500,000 - $11,585,000 = $153,915,000

Therefore, the answer is C, $153,915,000.