Question

The Scandrick Corporation needs to raise $91 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 $65 per share and the company’s underwriters charge a spread of 7 percent, how many shares need to be sold? (Do not round intermediate calculations and enter your answers in shares, not millions of shares, rounded to the nearest whole number, e.g., 1,234,567.)

Answer 1

Amount needs to be raised = $ 91 million

Spread charges = 7%

Offer price = $65

Total amount raised*(1-Spread) = Amount of funds needed

Total amount raised*(1-0.07) = $91 million

Total amount raised = $91 million/0.93

Total amount raised = $ 97,849,462

No of shares needs to be sold = Total amount raised/Offer price

= $ 97,849,462/$65

= 1505,376 shares

So, 1505,376 shares need to be sold to raise $ 91 million.

If you need any clarification, you can ask in comments.     

If you like my answer, then please up-vote as it will be motivating