Howett Pockett, Inc., plans to issue 10.3 million new shares of its stock. In discussions with its investment bank, Howett Pocket learns that the bankers recommend a net proceed of $34.40 per share and they will charge an underwriter’s spread of 6.0 percent of the gross proceeds. In addition, Howett Pockett must pay $3.7 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 10.3 million shares of stock.(Enter your answer in millions of dollars rounded to 3 decimal places.) |
Funds received by Howett Pockett | $ m |
Gross Proceeds per share = $36.60 per share
Gross Proceeds per share
Gross proceeds = Underwriters spread + Net Proceeds
Gross proceeds = [ 0.06 x Gross proceeds ] + $34.40
Gross proceeds – 0.06 Gross Proceeds + $34.40
0.94 Gross Proceeds = $34.40
Gross proceeds = $34.40 / 0.94 = $36.60 per share
Total funds received by Howett Pockett = $350.62 million
Total funds received by Howett Pockett
= [Number of shares x net proceeds per share ] - Legal and other administrative expenses
= [10.3 million shares x $34.40 per share ] - $3.70 million
= $354.32 million - $3.70 million
= $350.62 million
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