An Indian company issues 500,000 equity shares at a face value of ₹150 each. The underwriting commission is 3% of the issue size. What is the total underwriting commission that the underwriter receives?
Answer
₹2.25 crore
The correct answer is ₹2.25 crore — Calculate the commission: 3% of ₹75 crore = 0.03 × 75 = ₹2.25 crore.
Step-by-step solution
- Compute the issue size: 500,000 shares × ₹150 = ₹75,00,00,000 (₹75 crore).
- Calculate the commission: 3% of ₹75 crore = 0.03 × 75 = ₹2.25 crore.
Common mistake: Using the face value of one share instead of the total issue size
Concept tested: Underwriting commission calculation
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