20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for March and June 2025 exams.
Get your discount code >>

issue cost

This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.

Viewing 2 posts - 1 through 2 (of 2 total)

Author
Posts
August 22, 2018 at 1:57 pm #468866
thomas1212
Member
- Topics: 45
- Replies: 16
when we need to raise 2m and issue cost is 3%
i know that we must calculate the issue cost as (3 / 0.97 )
however i do not understand why the issue cost isn’t (3 / 100) ??
why we use the base as 97 not 100 ???
i simply the know the method but i do not know the rationale behind it
August 23, 2018 at 5:53 am #469003
John Moffat
Keymaster
- Topics: 57
- Replies: 54674
If they raid $100 and then have to pay issue costs of 3%, then they pay $3 which leaves $97 to invest.
Therefore for every $97 they want to invest, they need to raise $100, so 100/97 x the total investment.
Author
Posts

Viewing 2 posts - 1 through 2 (of 2 total)

You must be logged in to reply to this topic.