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
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issue cost
8y ago#1If 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.
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