Question

XYZ, Inc., has issued 11 million new shares of stock. An investment bank agrees to underwrite these shares on a best efforts basis. The investment bank is able to sell 8.8 million shares for $31 per share, and it charges XYZ $0.695 per share sold.a.How much money does XYZ receive after commission

Answer 1

Cash amount received by XYZ Inc after commission is $266,684,000.00

Step-by-step explanation:

The total cash received by the investment bank=shares sold*issue price

shares sold is 8.8 million

issue price is $31

total cash received by the investment bank=8,800,000*$31

=$272,800,000

Net proceeds received by XYZ=gross proceeds-underwriting charges

underwriting charges=shares sold*charge per share

=8,800,000*$0.695

=$6,116,000

Net proceeds received by XYZ=$272,800,000 -$6,116,000

=$266,684,000.00

The cash proceeds received by XYZ Inc after the deduction of investment bank charges is =$266,684,000.00

Answer 2

$266,684,000 ( or can say $266.7 million)

Step-by-step explanation:

XYZ receive after commission = number of shares sold * (price per share – commission charged per share)

= 8,800,000 * ($31 - $0.695)

= $266,684,000