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The Beranek Company, whose stock price is now $30, needs to raise $13 million in common stock. Underwriters have informed the firm's management that they must price the new issue to the public at $25 per share because of signaling effects. The underwriters' compensation will be 6% of the issue price, so Beranek will net $23.50 per share. The firm will also incur expenses in the amount of $165,000. How many shares must the firm sell to net $13 million after underwriting and flotation expenses

Respuesta :

Answer:

858,085 shares must be sold

Explanation:

Net amount to be raised                   $ 13,000,000

Add: floatation expenses                           165,000

Amount to be available after

payment of underwriting compensation             20,165,000          

No of shares to be issued at 23.50 $      = 20,165,000/23.50 =  shares, rounded off to 858,085 shares.

858,085 shares must be sold

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