issue cost

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August 22, 2018 at 1:57 pm #468866
thomas1212
Member
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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
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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.
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