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12 September, 13:25

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

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  1. 12 September, 13:50
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    Cash amount received by XYZ Inc after commission is $266,684,000.00

    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
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