The Food Network needs to raise $16.8 million to expand its operations nationally. The company will sell new shares of common stock using a general cash offering. The underwriters spread will be 7.85 percent, the administrative costs will be $515,000, and the offer price will be $21 per share. How many shares of stock must be sold for the company to receive the expansion funds it needs?

Question

Business

Patricia Doyle

21 January, 07:58

The Food Network needs to raise $16.8 million to expand its operations nationally. The company will sell new shares of common stock using a general cash offering. The underwriters spread will be 7.85 percent, the administrative costs will be $515,000, and the offer price will be $21 per share. How many shares of stock must be sold for the company to receive the expansion funds it needs?

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Answers (1)

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Buster · Answer 1

The number of shares of stock that must be sold is 894,763 shares

Explanation:

$16.8 million = Money to be raised to expand the operations of the company

515,000 = Administrative costs

First, With these details we can calculate the total amount, which is=

Total amount = 16,800,000 + 515,000 = 17,315,000

After having the total amount calculated we the proceed with the calculation of the number of shares that must be sold

Number of shares = 17,315,000 / 21 (1 - 0.0785)

Number of shares = 17,315,000 / 19.3515

Number of shares = 894,763 shares