Question

A company needs to net $12,800,000 from the sale of common stock. The retail price will be $22 per share, and the company will receive $18.50 per share. Out-of-pocket costs are $250,000. How many shares must be sold to achieve the desired net to the issuing firm? Round up the answer to the nearest whole number.

Answer 1

To achieve a net of $12,800,000, the company must sell 678,379 shares after accounting for out-of-pocket costs and the net amount received per share.

Step-by-step explanation:

To determine the number of shares needed to be sold to net $12,800,000 from the sale of common stock, we need to consider the per-share net to the company and out-of-pocket costs. Since the company will receive $18.50 per share and has out-of-pocket costs of $250,000, we first need to subtract these costs from the total net required:

$12,800,000 (desired net) - $250,000 (out-of-pocket costs) = $12,550,000 (net after out-of-pocket costs).

Next, we divide this amount by what the company will receive per share to find the number of shares that must be sold:

$12,550,000 (net after out-of-pocket costs) ÷ $18.50 (net per share) = 678,378.38 shares.

Since we cannot sell a fraction of a share, we round up to the nearest whole number, resulting in 678,379 shares needing to be sold to achieve the desired net.