Question

Jenny Corp. needs to raise $53 million to fund a new project. The company will sell shares at a price of $29.00 in a general cash offer and the company's underwriters will charge a spread of 7.5 percent. The direct flotation costs associated with the issue are $925,000. How many shares need to be sold?

Answer 1

2,010,252 Shares

Step-by-step explanation:

The funds that are to be raised = $53,000,000

Spread = 7.5%

Share price = $29.00

Flotation cost with issue = 925,000

We have that:

(53000000+925000)/92.5 * 100

(539,250,000/92.5)x100

= $58297.973 x 100

= $58297297.3

The offer per share is placed at $29.00

So to get the number of shares sold:

$58297297.3 / $29.00

= 2,010,252 shares are to be sold.