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11 January, 02:59

The Whistling Straits Corporation needs to raise $86 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 $40 per share and the company's underwriters charge a spread of 8 percent. If the SEC filing fee and associated administrative expenses of the offering are $975,000, how many shares need to be sold

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  1. 11 January, 06:03
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    Number of shares to be sold = 2,363,451.09 units

    Explanation:

    The gross amount to be raised inclusive of administrative fees

    = $86 million + $975,000

    = $86, 975,000

    Total sum to be raised inclusive of underwriting fees

    = 100 / (100-8) * 86, 975,000

    = $94,538,043.48

    Note the amount to be raised net the underwriting fees (i. e $86,975,000) represents 92%. So we need to work back to 100%

    Total number of shares = Gross sum to be raised / unit price of share

    =$94,538,043.48 / $40

    =2,363,451.09 units
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