The Scandrick Corporation needs to raise $70 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 $30 per share and the company's underwriters charge a spread of 8 percent. If the SEC filing fee and associated administrative expenses of the offering are $575,000, how many shares need to be sold? (Do not round intermediate calculations and enter your answer in shares, not millions of shares, rounded to the nearest whole number, e. g., 1,234,567.)

Question

Danielle Carey

Business

28 July, 02:42

The Scandrick Corporation needs to raise $70 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 $30 per share and the company's underwriters charge a spread of 8 percent. If the SEC filing fee and associated administrative expenses of the offering are $575,000, how many shares need to be sold? (Do not round intermediate calculations and enter your answer in shares, not millions of shares, rounded to the nearest whole number, e. g., 1,234,567.)

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Answers (1)

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Francis · Answer 1

2,536,232 shares

Explanation:

For computing the shares need to be sold, first we have to determine the net proceed which is shown below:

= (Raise amount to finance its expansion into new markets) : (1 - company's underwriters charge a spread percentage)

= ($70,000,000) : (1 - 8%)

= $76,086,956.52

Now the required number of shares sold would be

= Net proceeds amount : offer price per share

= $76,086,956.52 : $30

= 2,536,232 shares