Question

Harper’s Dog Pens, Inc. with the help of its investment bank, recently issued $196.6 million of new debt. The offer price on the debt was $1,000 per bond and the underwriter’s spread was 6 percent of the gross proceeds. Calculate the amount of capital funding Harper’s Dog Pens raised through this bond issue.

Answer 1

Answer:

$184,804,000

Explanation:

The computation of the amount for capital funding raised through the bond issue is shown below:

= Debt issued × (1 - Underwriter’s spread)

where,

Debt issued is $196,600,000

And, the underwriter spread is 6%

Now putting these values to the above formula

So, the amount of capital funding raised is

= $196,600,000 × (1 - 6%)

= $196,600,000 × 0.94

= $184,804,000