Answer:
The correct answer is $36.27
Explanation:
Amount of net proceeds is $1,680,000. Number of shares to be issued is 5,000. Underwriters charge the spread at 7.35%.
Hence, 100% of the amount should cover $1,680,000 and the underwriter charges. Hence, the total amount required to be raised is more than $1,680,000.
Step 1: Calculate the amount to be raised.
Amount Needed = Amount to be raised by selling shares x (1 - Underwriters' Charge)
1,680,000 = Amount to be raised by selling shares x (1 – 0.0735)
1,680,000 = Amount to be raised by selling shares x 0.9265
Amount to be raised by selling shares = 1,680,000 / 0.9265
Amount to be raised by selling shares = 1,813,275.77
Step 2: Calculate the offer price.
Offer Price = Amount to be raised by selling Equity / Number of shares need to be sold
Offer Price = 1,813,275.77 / 50,000
Offer Price =$36.27
Therefore, the correct answer is $36.27
