Just Add Water, Inc., with the help of its investment bank recently issued $45,000,000 of new debt. The offer price on the debt was $1,000 per bond and the underwriter's spread was 3 percent of the gross proceeds. What amount of capital funding did Just Add Water raise through this bond issue?

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Quizplus · Accepted Answer

Just Add Water, Inc. raised $43,650,000 through this bond issue. The total gross proceeds from the bond issue were $45,000,000. The underwriter's spread was 3 percent of this amount, which is $45,000,000 * 0.03 = $1,350,000. Therefore, the net proceeds (capital raised) are $45,000,000 - $1,350,000 = $43,650,000.