The Taussig Company, whose stock price is currently $20.50, needs to raise $15 million by issuing common stock. Underwriters have informed Taussig’s management that it must price the new issue to the public at $20 per share to ensure that all shares will be sold. The underwriters’ compensation will be 7 percent of the issue price, so Taussig will net $18.60 per share. The company will also incur expenses in the amount of $252,000. How many shares must Taussig sell to net $15 million after underwriting and flotation expenses?
The Taussig Company, whose stock price is currently $20.50, needs to raise $15 million by issuing common stock. Underwriters have informed Taussig’s management that it must price the new issue to the public at $20 per share to ensure that all shares will be sold. The underwriters’ compensation will be 7 percent of the issue price, so Taussig will net $18.60 per share. The company will also incur expenses in the amount of $252,000. How many shares must Taussig sell to net $15 million after underwriting and flotation expenses?
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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The Taussig Company, whose stock price is currently $20.50, needs to raise
$15 million by issuing common stock. Underwriters have informed Taussig’s management
that it must price the new issue to the public at $20 per share to ensure
that all shares will be sold. The underwriters’ compensation will be 7 percent of the
issue price, so Taussig will net $18.60 per share. The company will also incur
expenses in the amount of $252,000. How many shares must Taussig sell to net
$15 million after underwriting and flotation expenses?
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