How many shares must the firm sell to net $30 million after underwriting and flotation expenses?
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The Beranek Company, whose stock price is now $20, needs to raise $30 million in common stock. Underwriters have informed the firm's management that they must price the new issue to the public at $16 per share because of signaling effects. The underwriters' compensation will be 4% of the issue price, so Beranek will net $15.36 per share. The firm will also incur expenses in the amount of $190,000. How many shares must the firm sell to net $30 million after underwriting and flotation expenses? Do not round intermediate calculations. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest whole number.
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- The stock price of Wards Company is currently $35. Wards need to raise $25 million by issuing common stock. Underwriters have informed Wards’ management that it must price the new issue to the public at $40 per share to ensure that all shares will be sold. The underwriters’ compensation will be 8 percent of the issue price, so Wards will net $36.80 per share. The company will also incur expenses in the amount of $392,000. How many shares must Wards sell to net $25 million after underwriting and flotation expenses? Provide the quantitative reasoning/calculations you used to solve this question.The Taussig Company, whose stock price is currently $20.50, needs to raise$15 million by issuing common stock. Underwriters have informed Taussig’s managementthat it must price the new issue to the public at $20 per share to ensurethat all shares will be sold. The underwriters’ compensation will be 7 percent of theissue price, so Taussig will net $18.60 per share. The company will also incurexpenses in the amount of $252,000. How many shares must Taussig sell to net$15 million after underwriting and flotation expenses?The Beranek Company, whose stock price is now $25, needs to raise$20 million in common stock. Underwriters have informed the firm’s management that they must price the new issue to the public at $22 per sharebecause of signaling effects. The underwriters’ compensation will be 5% ofthe issue price, so Beranek will net $20.90 per share. The firm will also incurexpenses in the amount of $150,000. How many shares must the firm sell tonet $20 million after underwriting and flotation expenses?
- The Mont Corporation needs to raise $51.3 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 company's underwriters charge a spread of 8.5 percent. The SEC filing fee and associated administrative expenses of the offering are $1,453,000. What are the required proceeds from the sale necessary for the company to pay the underwriter's spread and administrative costs? a. $57,653,551.91 b. $52,753,000.00 c. $54,376,553.85 d. $56,851,955.35Midland Corporation has a net income of $13 million and 6 million shares outstanding. Its common stock is currently selling for $49 per share. Midland plans to sell common stock to set up a major new production facility with a net cost of $23,265,000. The production facility will not produce a profit for one year, and then it is expected to earn a 12 percent return on the investment. Stanley Morgan and Co., an investment banking firm, plans to sell the issue to the public for $45 per share with a spread of 6 percent. a. How many shares of stock must be sold to net $23,265,000? (Note: No out-of-pocket costs must be considered in this problem.) (Do not round intermediate calculations and round your answer to the nearest whole number.) Number of shares b. What are the earnings per share (EPS) and the price-earnings ratio before the issue (based on a stock price of $49)? What will be the price per share immediately after the sale of stock if the P/E stays constant? (Do not round…Bullant Inc. has decided to go public and has sold 2 million of its shares to its underwriter for $20 per share. The underwriter then sold them to the public for $22 each. Bullant also encountered $0.5 million in administrative fees. Soon after the issue, the stock price rose to $25. Find Bullant s total cost of this issue including any underpricing.
- Mahomes Manufacturing needs to raise $80 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 55 percent common stock, 15 percent preferred stock, and 30 percent debt. Flotation costs for issuing new common stock are 5 percent, for new preferred stock, 3 percent, and for new debt, 2 percent. What is the true initial cost figure the company should use when evaluating its project?Zerriman Co. wants to raise equity capital (sell stock shares) to fund a $15 million dollar project that will increase net income by 18%. The company will sell shares for $160 each less the underwriter's 7.86% charge. Overhead costs for the stock issue will be $1,850,000. Currently, the company has 2,635,000 shares outstanding and generates $81,955,440 in net income. If the Price-to-Earnings ratio (PE ratio) stays constant at 5.25, how will the stock sale impact the market value of the shares (stock price)? (Note: this problem will require calculating the number of shares sold, as well as EPS and share price for pre- and post-sale.)The Very Big Corporation needs to net $10,000,000 from the sale of common stock. Its investment dealer has informed the firm that the reatil price will be $25 per share, and the firm will receive $22 per share. Out-of-pocket costs are $300,000. How many shares must be sold?
- Newdex has net income of $3,000,000 (Including the effect of expected out-of-pocket costs) and 1,000,000 shares outstanding. It needs to raise $5,000,000 in funds for a new asset. It's investment banker plans to sell an issue of common stock to the public for $40, less spread of 10%. How much must Newdex's after-tax income increase by to prevent dilution of earnings per share?D Plc is in the process of making a 1 for 4 rights issue. The rights letters have just been sent to shareholders. The company currently has 20m K1 shares in issue and the current market price is K4.50 per share. The rights letter gives shareholders the right to buy their new shares for K3.50 each. D Plc plans to use the cash raised to build a major extension to its factory, thereby doubling production capacity. The finance director has received an angry letter from a shareholder. The shareholder complains that he cannot afford to invest in new shares. He contends that he is likely to suffer a loss because of the fact that the market will be flooded with cheap shares as the issue will almost certainly decrease the value of his holding. Required: I. Calculate the value at which the share price is likely to settle after the rights issue. II. Explain whether the shareholder’s complaint is justified with particular reference to the difference between the rights price and the current…A company needs $35,943,750 to finance a major project in the company. The company expects that next year’s earnings from current operations and the additional earnings from the new project will be a total of $45,650,000. The company currently has 5,075,000 shares outstanding, with a price of $17.75 per share. The company’s management is assuming that any the additional shares issued to finance the project will not affect the market price of the company’s common stock. Calculate the following: If the $35,943,750 needed for the project is raised by selling new shares, what will the forecast for next year’s earnings per share (EPS) be? If the $35,943,750 needed for the project is raised by selling new shares, what will the firm’s price earnings ratio (PE ratio) be? If the $35,943,750 needed for the project is raised by issuing new debt, what will the forecast for next year’s earnings per share be? (Assume that there is no “tax shield effect” with issuing corporate debt.) If the…