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Hi Sir
issue costs are calculated as 30,600/0.96. Shouldn’t you take 96% if 30,600 is net of issue costs?? The question says issue costs of 4% from gross finance so shouldn’t it be 30,600*4%?No.
What you have written would mean that after the issue costs they would only end up with
30,600 – (4% x 30,600) = 29,376 net of issue costs.If they want to end up with 30,000 net of issue costs then they need to raise 30,000/0.96 = 31,250.
Then they end up with 31,250 – (4% x 31,250) = 30,000 net of issue costs.
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