Question

The Sullivan Co. needs to raise $65.4 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 $54 per share and the company’s underwriters charge a spread of 8 percent. How many shares need to be sold?

Answer 1

Answer:The Company needs to sell 1.11 million shares.  

Explanation:

Since 8% shares are already taken b underwriters, the Compay needs to sell 92% of shares. So 92% of total amount (65.4 million) is $ 60.168 million. We will divide the amount by price per share of $54 to get amount of shares needed to be sold. So after dividing is $ 60.168 million by $54, we get 1.11 million shares which is the answere.