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EQUITY ISSUE QUESTION - PLEASE HELP!!!?

Investment Bankers Association (IBA) has an agreement with Northern Airlines to underwrite an equity issue with a market value equal to $11 million. a) If IBA's underwriting fee is 5 percent and its out-of-pocket expenses associated with the issue are $125,000, what is the net amount hat IBA will receive under its agreement with Northern? b) Assuming that the information in part a does not change and Northern incurs out-of-pocket expenses equal to $240,000 for items such as printing, legal fees, and so on, what will be the net proceeds from the equity issue for Northern? Please show any work you can so I can learn from this, thank you!!! :)

Public Comments

1. Brandi, here is your solution: 1) $11,000,000 x 0.95 = $10,450,000 - $125,000 = $10,325,000 proceeds from underwriter. 2) $10,325,000 - $240,000 = $10,085,000 net proceeds to company.