Renee’s Boutique, Inc., needs to raise $58.16 million to finance firm expansion.
ID: 2613933 • Letter: R
Question
Renee’s Boutique, Inc., needs to raise $58.16 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 5.5 percent of the gross price.
Calculate the net proceeds to Renee’s from the sale of the debt. (Enter your answer in millions of dollars and round to 2 decimal places.)
How many bonds will Renee’s Boutique need to sell in order to receive the $58.16 million it needs? (Do not round intermediate calculations and round your final answer to the nearest whole number.)
Number of bonds
bonds
Renee’s Boutique, Inc., needs to raise $58.16 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 5.5 percent of the gross price.
Renee's Boutique, Inc., needs to raise $58.16 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 peir bond and they will charge an underwriter's spread of 5.5 percent of the gross price. Calculate the net proceeds to Renee's from the sale of the debt. (Enter your answer in millions of dollars and round to 2 decimal places.) Net proceeds to Renee's 54.96 m How many bonds will Renee's Boutique need to sell in order to receive the $58.16 million it needs? (Do not round intermediate calculations and round your final answer to the nearest whole number.) Number of bonds 61545 bondsExplanation / Answer
The company needs $54.96 million for the expansion. This amount will be after paying off the underwriter's spread.
Net proceeds = Funds required / (1 - underwriter's spread)
or, Net proceeds = $54.96 million / (1 - 0.055) = $61.54497 million or $61.55 million