How much will a firm receive in net funding from a firm commitment underwriting of 250,000 shares priced to the public at $40 if a 10% underwriting spread has been added to the price paid by the underwriter? Additionally,the firm pays $600,000 in legal fees.

Question

Quizplus · Accepted Answer

The total amount raised by the firm is calculated as follows:

$40 x 250,000 = $10,000,000

The amount of the underwriting spread is:

10% x $10,000,000 = $1,000,000

The amount paid to the firm by the underwriter is:

$10,000,000 - $1,000,000 = $9,000,000

The net funding received by the firm is:

$9,000,000 - $600,000 = $8,400,000

Therefore, the correct answer is C.

How Much Will a Firm Receive in Net Funding from a Firm