The Whistling Straits Corporation needs to raise $86 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 $40 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 $975,000, how many shares need to be sold

Question

Jaden Cobb

Business

4 December, 20:51

The Whistling Straits Corporation needs to raise $86 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 $40 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 $975,000, how many shares need to be sold

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Marcellus · Answer 1

Number of shares to be sold = 2,363,451.09 units

Explanation:

The gross amount to be raised inclusive of administrative fees

= $86 million + $975,000

= $86, 975,000

Total sum to be raised inclusive of underwriting fees

= 100 / (100-8) * 86, 975,000

= $94,538,043.48

Note the amount to be raised net the underwriting fees (i. e $86,975,000) represents 92%. So we need to work back to 100%

Total number of shares = Gross sum to be raised / unit price of share

=$94,538,043.48 / $40

=2,363,451.09 units