The Whistling Straits Corporation needs to raise $64 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 $60 per share and the company's underwriters charge a spread of 5 percent, 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.)

Question

Semaj Montoya

Business

31 March, 00:13

The Whistling Straits Corporation needs to raise $64 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 $60 per share and the company's underwriters charge a spread of 5 percent, 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.)

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Marlon Lindsey · Answer 1

Hence $21,700,000 shares are to be sold to raise the needed funds.

Explanation:

Per-share offer price of company = $60, which includes company's underwriter spread of 5%

So, actual realization to company on $60 per share = (1 - 0.95) * 60

Actual realization to company on $60 per share = $ 3

To raise $64 million company also needs to cover administrative expenses of $1.2 million

So,

Total number of shares sold (in million) = (64 + 1.2) / 3

Total number of shares sold = 21,700,000 shares