Answer:
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
The disadvantage of related diversification is that firms are able to look for promising investment opportunities for future profit, which means option B is the right answer.
Diversification is the act of inducing more branches of a business to expand it in the preexisting operations in areas where it is not present. Related diversification enhances shareholder value by taking control over cross-business strategic fits. It enables transfer of skills and capabilities from one business to another. It causes a combination of new resources to produce batter capacities and capability. Related diversification can allow a firm to share and transfer critical success factors across different businesses leading to efficiencies in resource allocation. The disadvantages are often too optimistic and are harder to manage. Also, several significant barriers are present which actually capitalize on shared synergies and related diversification is often overvalued.
Learn more about Diversification at:
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