The Elkmont Corporation needs to raise $52 million to finance its expansion into
ID: 2762224 • Letter: T
Question
The Elkmont Corporation needs to raise $52 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 $36 per share and the company’s underwriters charge a spread of 9 percent. The SEC filing fee and associated administrative expenses of the offering are $1,460,000. (Enter your answer as directed, but do not round intermediate calculations.)
How many shares need to be sold? (Enter the whole number for your answer, not millions (e.g., 1,234,567). Round your answer to the nearest whole number (e.g., 1,234,567).)
Required:How many shares need to be sold? (Enter the whole number for your answer, not millions (e.g., 1,234,567). Round your answer to the nearest whole number (e.g., 1,234,567).)
Explanation / Answer
Elkmont Corporation Details Amt $/No Offer Price /share 36.0 Less Underwriter spread @9%= (3.2) Net Proceeds per share = 32.8 Required finance 52,000,000.0 Add Associated expenses 1,460,000.0 Total Fund Required= 53,460,000.0 Net Proceeds per share = 32.8 No of shares to be issued=53460000/32.8= 1,631,868 So no of shares offered= 1,631,868 nos
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