Question

The Whistling Straits Corporation needs to raise $80 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 $35 per share and the company's underwriters charge a spread of 5 percent. If the SEC filing fee and associated administrative expenses of the offering are $600,000, how many shares need to be sold? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number, e.g., 1,234,567.)

Answer 1

Answer:

Number of shares= 2,424,060 units  

Explanation:

The number of shares to be sold can be worked back as follows:

                                                                   $

Gross proceeds                                      80,000,000

Administrative fees                                      600,000

                                                                 80,600,000

Gross proceed inclusive of Underwriting fees

= 80,600,000/(100-8)%

=84,842,105.26

Number of shares to be sold = Gross proceeds/price per share

=$84,842,105.26 /$35

= 2,424,060.15  

Number of shares= 2,424,060 units