ABC Ltd. intends to raise funds by issuing 10,000 debentures of ₹1,000 each at a discount of 2%. The company also agrees to pay a commission of 0.5% on the total issue size to the underwriter. Compute (i) the gross issue amount, (ii) the discount amount, (iii) the commission payable, and (iv) the net proceeds that ABC Ltd. will receive.

Step-by-step solution

1. Calculate the gross issue amount: 10,000 debentures × ₹1,000 = ₹10,000,000.
2. Find the discount amount: 2% of ₹10,000,000 = 0.02 × 10,000,000 = ₹200,000.
3. Subtract the discount to get the amount received before commission: ₹10,000,000 – ₹200,000 = ₹9,800,000.
4. Compute the commission on the gross issue size: 0.5% of ₹10,000,000 = 0.005 × 10,000,000 = ₹50,000.
5. Deduct the commission from the amount after discount: ₹9,800,000 – ₹50,000 = ₹9,750,000.
6. Thus, the net proceeds to ABC Ltd. are ₹9,750,000.

Concept tested: Debenture issue – net proceeds calculation

Published 13 October 2026 · How this solution was prepared and checked