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8 August, 12:09

The Whistling Straits Corporation needs to raise $64 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. If the offer price is $60 per share and the company's underwriters charge a spread of 5 percent, how many shares need to be sold? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number, e. g., 1,234,567.)

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  1. 8 August, 15:00
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    Hence $21,700,000 shares are to be sold to raise the needed funds.

    Explanation:

    Per-share offer price of company = $60, which includes company's underwriter spread of 5%

    So, actual realization to company on $60 per share = (1 - 0.95) * 60

    Actual realization to company on $60 per share = $ 3

    To raise $64 million company also needs to cover administrative expenses of $1.2 million

    So,

    Total number of shares sold (in million) = (64 + 1.2) / 3

    Total number of shares sold = 21,700,000 shares
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