Question

Corporation needs to raise $70 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. The offer price is $30 per share and the company’s underwriters charge a spread of 8 percent. If the SEC filing fee and associated administrative expenses of the offering are $575,000, how many shares need to be sold?

(Do not round intermediate calculations and enter your answer in shares, not millions of shares, rounded to the nearest whole number, e.g., 1,234,567.)

Answer 1

$2536.232

Step-by-step explanation:

The spread in this case is 30*8% = 2.4

A spread is simply gap between the bid and the ask prices of a security or asset, like a stock, bond or commodity and the net proceeds are the amount of money the seller receives following the sale of an asset after all costs and expenses are deducted from the gross proceeds.

The net proceeds in this case is 30-2.4 =27.6

To get the number of share we can simply divide the funds need by the net proceeds per share = 70000000/27.6 = $2536.232. Therefore the correct answer is $2536.232