Question

Devine Linens (DL) must raise $14,000,000 to support future growth. If it raises the funds by issuing stock, DL must pay an investment banker 5 percent of the total amount issued plus $250,000 in other costs associated with the issue. What is the amount of stock that DL must issue to net $14,000,000 after flotation costs?

A. $14,962,500B. $14,950,000C. $14,737,092D. $15,000,000E. $13,537,500

Answer 1

D. $15,000,000

Step-by-step explanation:

amount to be raised before 5%cost = $14,000,000 + $250,000

=$14,250,000

then:

100 - 5 = 95% ~~ $14,250,000

100% ~~ $ 15,000000

Therefore, the amount required to be raised is $15,000,000.