Jack\'s camping equipment needs $30 million to finance a new facility to manufac

Question

Jack's camping equipment needs $30 million to finance a new facility to manufacture outdoor grills. The management has met with underwriters who feel that the firm could sell additional shares of stock at $19
a share with a 7 percent underwriting spread. The estimated issue costs are $315,000.
How many shares of stock will Jack"s need to sell if they choose firm commitment
underwriting for their new facility ?
a) 1697793 shares b)1706053 shares c) 1707213 shares d) 1715620 shares e) 1721321 shares
please show work

Explanation / Answer

Total value of issue = (30,000,000 + 315,000) / (1-0.07)
Total value of issue = 32,596,774.19

Number of shares needed = 32,596,774.19 / 19
Number of shares needed = 1,715,619.69 shares
Number of shares needed = 1,715,620 shares

d) 1,715,620 shares

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