Question

Angina, Inc., has 5 million shares outstanding. The firm is considering issuing an additional 1 million shares. After selling these shares at their $20 per share offering price and netting 95% of the sale proceeds, the firm is obligated by an earlier agreement to sell an additional 250,000 shares at 90% of the offering price. In total, how much cash will the firm net from these stock sales?

Answer 1

Answer:

$23,500,000

Explanation:

Angina Inc. has an outstanding of 5 million shares

The company is considering issuing an additional 1 million shares at $20 per share offering price and 95% of the proceeds gotten from the sale

An earlier agreement obligated the firm to sell an additional 250,000 shares at 90% of the offering price

The first step is to calculate the net proceeds for the shares sold

Net proceeds= Number of shares sold×price per share×percentage of sales proceed

The net proceeds for 1,000,000 shares can be calculated as follows

= 1,000,000×95/100×$20

= 1,000,000×0.95×$20

= $19,000,000

The net proceeds for 250,000 shares can be calculated as follows

= 250,000×90/100×$20

= 250,000×0.9×$20

= $4,500,000

Therefore, the total proceeds can be calculated as follows

= $19,000,000+$4,500,000

= $23,500,000

Hence the firm will realize a total cash of $23,500,000 from the stock sale.