Question

Howett Pockett, Inc., plans to issue 11.6 million new shares of its stock. In discussions with its investment bank, Howett Pocket learns that the bankers recommend a net proceed of $37.00 per share and they will charge an underwriter’s spread of 4.5 percent of the gross proceeds. In addition, Howett Pockett must pay $5.0 million in legal and other administrative expenses for the seasoned stock offering. Calculate the gross proceeds per share. (Round your answer to 2 decimal places.)   Gross proceeds $ per share   Calculate the total funds received by Howett Pockett from the sale of the 11.6 million shares of stock.(Enter your answer in millions of dollars rounded to 3 decimal places.)   Funds received by Howett Pockett $ m  

Answer 1

Gross Proceeds per share = $38.74 per share

Gross Proceeds per share

Gross proceeds = Underwriters spread + Net Proceeds

Gross proceeds = [ 0.045 x Gross proceeds ] + $37.00

Gross proceeds – 0.045 Gross Proceeds + $37.00

0.955 Gross Proceeds = $37.00

Gross proceeds = $37.00 / 0.955 = $38.74 per share

Total funds received by Howett Pockett = $424.20 Million

Total funds received by Howett Pockett

= [ Number of shares x net proceeds per share ] - Legal and other administrative expenses

= [11.6 million shares x $37.00 per share ] - $5.0 million

= $ 429.20 million - $5.0 million

= $424.20 Million