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6 January, 06:23

Persian Rugs needs $600 million to support growth next year. If it issues new common

stock to raise the funds, the flotation (issuance) costs will be 4 percent. If Persian can issue

stock at $125 per share, how many shares of common stock must be issued so that it has

$600 million after flotation costs to use for its planned growth?

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Answers (1)
  1. 6 January, 08:50
    0
    4, 992,000 shares

    Explanation:

    Amount that need to be raised: $600

    flotation cost 4 percent:

    Actual flotation cost: = 4/100 x $600

    =0.04 x $600

    =$24 million

    Total amount that must be arise = $600 + $24

    =$624

    Value per share $125

    Number of shares need to raise $624million = $624,000,000/$125

    =4, 992,000 shares
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