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4 December, 17:25

Jenny Corp. needs to raise $50 million to fund a new project. The company will sell shares at a price of $28.40 in a general cash offer and the company's underwriters will charge a spread of 6.5 percent. The direct flotation costs associated with the issue are $775,000. How many shares need to be sold

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  1. 4 December, 21:01
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    Around 1762337 shares

    Explanation:

    The amount needed to be raised = $50,000,000

    Price per share = $28.40

    Number of shares needed here = $50,000,000/28.40 = 1760563 shares

    Cost to be covered with the issue = 6.5% of direct flotation costs

    =6.5/100 * $775,000 = $50375

    Extra shares needed to covered this cost

    $50375/$28.40 = 1774 shares

    Total shares to be sold = 1760563+1774 = 1762337 shares
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