The Huang Corporation needs to raise $86 million to finance its expansion into n
ID: 2635703 • Letter: T
Question
The Huang 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? (Do not round intermediate calculations and round your final answer to nearest whole number. Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)
Number of shares offered: 2,310,462 <<< This is what I got, but Connect is saying it's incorrect!?
What am I doing wrong??
86,000,000 - 975,000 = 85,025,000
85,025,000 / (1 - .08) = 85,025,000 / .92 = 92418478
92418478 / 40 = $2,310,462
Number of shares offered: 2,310,462 <<< This is what I got, but Connect is saying it's incorrect!?
What am I doing wrong??
86,000,000 - 975,000 = 85,025,000
85,025,000 / (1 - .08) = 85,025,000 / .92 = 92418478
92418478 / 40 = $2,310,462
Explanation / Answer
Let X be the amount raised through issue of shares
Thus, X-0.08X-975000= $86,000,000
=>0.92X-975000 = $86,000,000
=>0.92X = 86,975,000
=> X= $94538043
Hence the amount to be raised through issuing shares is $94538043
If the offer price is $40 per share, number of shares to be issued= $94538043/ $40 per share=
2363451.087= 2363451 (approx)
(Since the amount required for expansion plans is $86million, it has been assumed that after meeting all the costs, the net amount should be $86 million)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.