BC Brewery issues $30 million in straight bonds at an original issue discount of 2% and a coupon rate of 6%.The firm also pays underwriting fees of 2.5% on the face value of the bonds.What are the net proceeds to BC Brewery from the bond issue?

Question

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The net proceeds are calculated by subtracting both the original issue discount and the underwriting fees from the face value of the bonds. The original issue discount is 2% of $30 million, which is $0.6 million. The underwriting fees are 2.5% of $30 million, which is $0.75 million. Subtracting both from the face value, $30 million - $0.6 million - $0.75 million = $28.65 million.

BC Brewery Issues $30 Million in Straight Bonds at an Original