Free Trade Partners needs to raise $24.2million to expand its operations into South America. The company will sell new shares of common stock using a general cash offering. The underwriters will charge a spread of 7.6 percent, the administrative costs will be $631,000, and the offer price will be $32 per share. How many shares of stock must be sold if the firm is to raise the funds it desires?

Respuesta :

Answer:

839,793 stocks

Explanation:

Net proceeds = total proceeds - underwriting fees

  • net proceeds = $24,200,000
  • total proceeds = [stock price x (1 - spread)] x total number of stocks
  • underwriting fees = $631,000

$24,200,000 = [$32 x (1 - 0.076)]X - $631,000

$24,831,000 = $29.568X

X = $24,831,000 / $29.568 = 839,793 stocks