Question

The Zuri Co. needs to raise $65.8 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. The offer price is $58 per share and the company’s underwriters charge a spread of 8 percent. The SEC filing fee and associated administrative expenses of the offering are $458,000.
    
What are the required proceeds from the sale necessary for the company to pay the underwriter's spread and administrative costs? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.)
  
Required proceeds            $
  
How many shares need to be sold? (Do not round intermediate calculations and enter your answer in shares, not millions of shares, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.)
  
Number of shares offered   

Answer 1

Amount to be raised = 65800000
Offer price per share = $58
Underwriting charges = 8% or 0.08
Issue costs = 458000
(a)
Net proceeds required to cover Underwriting spread and Expenses = (Amount raised + issue cost)/ (1-underwriters spread)
(65800000+458000) / (1-0.80)
72019565.22
So amount required is $72,019,566
(b) Number of shares offered = Required proceeds/Issue price per share
72,019,566/58
1,241,716.7
So number of shares offered are 1241717

Please thumbs up