Your firm is expanding and you need $17 million to help fund this growth. You es

Question

Your firm is expanding and you need $17 million to help fund this growth. You estimate that you can sell new shares of stock for $45 a share. You also estimate that it will cost you $430,000 for legal, accounting, and other costs related to the stock issue. The underwriters have agreed to a 6 percent spread. How many shares of stock must you sell if you are going to have $17 million available for your expansion needs?

A. 365,409 shares

B. 390,316 shares

C. 364,093 shares

D. 401,891 shares

E. 412,057 shares

Explanation / Answer

Amount to be received per share = $45 - (6% x $45) = $42.3

Total amount required to be raised including other costs = $17,000,000 + $430,000 = $17,430,000

Shares to be issued = $17,430,000/$42.3 = 412,056.7 or 412,057 Shares

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