winston sporting goods is considering a public offering of common stock. The ret

Question

winston sporting goods is considering a public offering of common stock. The retail price will be $18 per share for 600,000 shares. The company will receive $16.50 per share and will incure $150,000 in registration fees. a) what is the spread on this issue in percentage terms? What are the total expenses of the issue as a percentage of total value (at retail)? Spread $= Spread %= Total value= Out of pocket/Total value= Spread %= Out of pocket= Total %= b) if the firm wanted to net $18 million from this issue, how many shares must be sold?

Explanation / Answer

Winston Sporting Goods
a. $18 – $16.50 = $1.50 spread $1.50/$18.00 = 8.33% spread
Total value = 600,000 shares x $18 = $10,800,000
Out-of-picket/total value $150,000/$10,800,000 = 1.39%
8.33% Spread
1.39% Out-of-pocket
9.72% Total %
b. Amount needed = $18,000,000
Total shares to be sold to net $18,000,000
= ($18,000,000 + issue costs)/net price per share
= $18,150,000/$16.50 per share = 1,100,000 shares

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.