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12 April, 07:44

The Whistling Straits Corporation needs to raise $72 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 $55 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 $700,000, how many shares need to be sold

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  1. 12 April, 08:03
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    1,390,718 shares

    Explanation:

    Amount to be raise = $72 million

    Underwriters charges = 5%

    Filling Fee = $700,000

    After deducting the underwriters charges the amount remains 95% of the total value. The company needs to raise exact $72 million after all charges deducted so, will take this amount as 95% of the total and gross up this value to 100%.

    Total Amount to be raised = Amount including the underwrites charge + Filling charge = ($72,000,000 / 100% - 5%) + $700,000 = $76,489,474

    Share price = $55

    Numbers of share = $76,489,474 / $55 = 1,390,718 shares
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