Calculating Costs of Issuing Stock WuShock, Inc. needs to raise $507 million to

Question

Calculating Costs of Issuing Stock WuShock, Inc. needs to raise $507 million to finance its plan for nationwide expansion. In discussions with its investment bank, WuShock's learns that the bankers recommend an offer price (or gross price) of $57 per share and they will charge an underwriter's spread of $3.75 per share. Calculate the net proceeds to WuShock's from the sale of stock. How many shares of stock will WuShock's need to sell in order to receive the $507 million they need?

507,000,000

135,200,000

9,521,127

8,894,737

Explanation / Answer

How many shares of stock will WuShock's need to sell in order to receive the $507 million they need?

Number of shares = Target value / (Offer price - Underwriters spread)

Number of shares = 507,000,000 / (57 - 3.75)

Number of shares = 9,521,127

.

Answer is = 9,521,127

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