The Educated Horses Corporation needs to raise $50 million to finance its expans

Question

The Educated Horses Corporation needs to raise $50 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 $25 per share and the company's underwriters charge an 6 percent spread. If the SEC filing fee and associated administrative expenses of the offering are $1,150,000, how many shares need to be sold? (Do not round your intermediate calculations.) rev: 09_20_2012 1,930,189 2,046,000 2,176,596 2,263,660 2,127,660

Explanation / Answer

Required proceeds net of spread=($50,000,000+SEC filing fees)/(1-spread)

=($50,000,000+$1,150,000)/(1-0.06)

=$54,414,893.62

Hence shares to be sold =$54,414,893.62/$25 per share

which is equal to

=2,176,596(Approx).

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