Ask Question
14 January, 11:23

Mountain Teas wants to raise $14.9 million to open a new production facility. The company estimates the issue costs for legal and accounting fees will be $582,000. The underwriters have set the stock price at $27.50 a share and the underwriting spread at 8.15 percent. How many shares of stock must be sold to meet this cash need?

+2
Answers (1)
  1. 14 January, 11:44
    0
    612,936 shares

    Explanation:

    The computation of the number of shares of stock must be sold is shown below:

    Before that we have to compute

    Required sales proceeds net of spread is

    = (Raise amount + estimated cost for legal and accounting fees) : (1 - spread rate)

    = ($14.9 million + $582,000) : (1 - 0.0815)

    = ($1,5482,000) : (1 - 0.0815)

    = $16,855,743.06

    So, shares to be sold is

    = $16,855,743.06 : $27.50

    = 612,936 shares
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Mountain Teas wants to raise $14.9 million to open a new production facility. The company estimates the issue costs for legal and ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers