United Uninsured Underwriters (U3) needs $192 million to stay in business. If new common stock is issued, U3 must pay its investment banker a fee equal to 8 percent of the total amount issued. The new issue will also require Us to pay $280,000 in fees to its lawyers, printing costs, and other costs associated with the issue. U3 can issue stock at $25 per share. How many shares of common stock must Us issue so that it has $192 million after flotation costs? Show how much of the total dollar amount of the issue will be flotation costs and how much U3 will receive after the flotation costs are paid.
United Uninsured Underwriters (U3) needs $192 million to stay in business. If new common stock is issued, U3 must pay its investment banker a fee equal to 8 percent of the total amount issued. The new issue will also require Us to pay $280,000 in fees to its lawyers, printing costs, and other costs associated with the issue. U3 can issue stock at $25 per share. How many shares of common stock must Us issue so that it has $192 million after flotation costs? Show how much of the total dollar amount of the issue will be flotation costs and how much U3 will receive after the flotation costs are paid.
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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United Uninsured Underwriters (U3) needs $192 million to stay in business. If new common stock is issued, U3 must pay its investment banker a fee equal to 8 percent of the total amount issued. The new issue will also require Us to pay $280,000 in fees to its lawyers, printing costs, and other costs associated with the issue. U3 can issue stock at $25 per share. How many shares of common stock must Us issue so that it has $192 million after flotation costs? Show how much of the total dollar amount of the issue will be flotation costs and how much U3 will receive after the flotation costs are paid.
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