Complete problem 13-2 on page 433 of the text and submit to your instructor. Cle

Question

Complete problem 13-2 on page 433 of the text and submit to your instructor. Clearly label the calculation of the required ratios and solve using excel. Use formulas to calculate the ratios and format the cells to insert a comma if there is more than three numbers. Round to the nearest whole number. In each part summarize your analysis in a concise management statement not to exceed 100 words each.
13-2. (Flotation costs and issue size) Your firm needs to raise $10 million. Assuming that flotation costs are expected to be $15 per share, and that the market price of the stock is $120, how many shares would have to be issued? What is the dollar size of the issue?

Explanation / Answer

Need to Funds raised = $10,000,000 Flotation costs are expected = $15 per share Market price of the stock = $120 per share Number of shares issued = [$10,000,000 / $120 per share] Number of shares issued = 83,333.33 shares Net Price = [$120 - $15] Net Price = $105 per share Dollar size of shares issued = [83,333.33 * ($120 - $15)] Dollar size of shares issued = [83,333.33 * $105] Dollar size of shares issued = $8,749,999.65

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