Question

Renee’s Boutique, Inc., needs to raise $58.03 million to finance firm expansion. In discussions with its investment bank, Renee’s learns that the bankers recommend a debt issue with an offer price of $1,000 per bond and they will charge an underwriter’s spread of 5.0 percent of the gross price.

1)Calculate the net proceeds to Renee’s from the sale of the debt.

2) How many bonds will Renee’s Boutique need to sell in order to receive the $58.03 million it needs?

Answer 1

Question	Particulars	Amount	Explanation
	Gross price	1,000	a
	Less underwriters spread	50	b=a*5%
1	Net proceeds	950	c= a-b
	Required fund	5,80,30,000	d
2	Number of bonds	61,084.21	e= d/c