Express Courier (EC) needs $141 million to support future growth. If it issues common stock to raise the needed funds, EC will have to pay its investment banker flotation costs of 6% of the issue's total value. If EC can issue common stock at a market price of $80 per share, how many shares must be issued so that the company has the $141 million that it needs? There are no other issuing expenses or fees in the offering.
Express Courier (EC) needs $141 million to support future growth. If it issues common stock to raise the needed funds, EC will have to pay its investment banker flotation costs of 6% of the issue's total value. If EC can issue common stock at a market price of $80 per share, how many shares must be issued so that the company has the $141 million that it needs? There are no other issuing expenses or fees in the offering.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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- Express Courier (EC) needs $141 million to support future growth. If it issues common stock to raise the needed funds, EC will have to pay its investment banker flotation costs of 6% of the issue's total value. If EC can issue common stock at a market price of $80 per share, how many shares must be issued so that the company has the $141 million that it needs? There are no other issuing expenses or fees in the offering.
- Jewel Regal Cars (JRC) must raise $240 million to support operations. To do so, JRC plans to issue new bonds. Investment bankers have informed JRC that the flotation costs will be 4% of the total amount issued. If the market
value of each bond is $1,000, how many bonds must JRC sell to net the $240 million that it needs? There are no other issuing expenses or fees in the offering. - Mom's Motel Corporation (MM) plans to issue bonds to raise $175 million that it needs to support future operations. MM's investment banker will charge flotation costs of 2.5% of the total amount issued to help MM raise the funds. In addition, MM will incur other costs associated with the issue that equal $500,000. The market value of each bond at issue time will be $1,000. How many bonds must GM sell to net $175 million that it needs?
- Jasmine Flowers (JF) must raise $345 million for its future expansion. To do so, JM expects to issue new common stock. Investment bankers have informed the company that the flotation costs will be 6.5% of the total amount issued and that the company will incur another $576,000 in costs associated with the issue. JF can issue its stock for $55 per share. How many shares JF must sell to net the $345 million it needs?
- Wilderness World (WW) needs to raise $84 million in debt. To issue the debt, WW must pay its underwriter a fee equal to 3% of the issue. The company estimates that other expenses associated with the issue will total $487,000. If the face value of each bond is $1,000, how many bonds must be issued to net the needed $84 million?
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