Question

The Whistling Straits Corporation needs to raise $60 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. If the offer price is $21 per share and the company’s underwriters charge a spread of 7 percent, how many shares need to be sold?

Answer 1

3,072,197 shares are needed to be sold.

Step-by-step explanation:

First, we need to calculate the required proceed.

Required proceeds

= ($60,000,000 + Sec filing fee and associated administrative expense) / (1 - Spread)

= ($60,000,000 + 0) / (1 - 0.07)

= $60,000,000 / 0.93

= $64,516,129.032

The requires shares needed to be sold;

= Required proceeds / Offer price

= $64,516,129.032 / $21

= 3072196.62

= 3,072,197 approximated