Final answer:
To determine the number of shares that need to be sold, calculate the total funds needed by adding the amount raised from selling shares and the flotation costs. Divide the total funds needed by the price per share to find the number of shares that need to be sold. The correct answer is approximately 2,352,643 shares.
Step-by-step explanation:
To determine the number of shares that need to be sold, we first need to calculate the total funds needed. The total funds needed include the amount raised from selling shares and the flotation costs. The flotation costs include direct costs and indirect costs.
The direct flotation costs are $850,000, and the indirect costs are $495,000. So, the total flotation costs are $850,000 + $495,000 = $1,345,000.
The total funds needed can be calculated as: Amount raised from selling shares + Flotation costs = $59.5 million + $1,345,000 = $60,845,000.
To find the number of shares that need to be sold, we need to divide the total funds needed by the price per share. The price per share is calculated as: Price per share = Net proceeds per share + Flotation costs per share.
The net proceeds per share can be calculated as: Net proceeds per share = Price per share - Underwriters' spread.
The underwriters' spread is 6% of the price per share. So, the underwriters' spread per share is 6% of $24.20 = $1.452.
Therefore, the net proceeds per share is $24.20 - $1.452 = $22.748.
The flotation costs per share can be calculated as: Flotation costs per share = Total flotation costs / Number of shares.
So, the number of shares that need to be sold is: Number of shares = Total funds needed / Price per share.
Using the values calculated above, the number of shares that need to be sold is approximately 2,352,643 shares. Therefore, the correct option is O 2,352,643 shares.