Young Corporation stock currently sells for $40 per share. There are 1 million shares currently outstanding. The company announces plans to raise $5 million by offering shares to the public at a price of $40 per share. a. If the underwriting spread is 6%, how many shares will the company need to issue in order to be left with net proceeds (before other administrative costs) of $5 million? Note: Do not round Intermediate calculations. Round your answer to the nearest whole number. Number of shares b. If the under writing spread is 6% and the other administrative costs are $55,000, what is the dollar value of the total direct costs of the issue? Note: Enter your answer in dollars not in millions. Do not round Intermediate calculations. Round your answer to the nearest whole dollar amount. Total direct costs c. If the share price falls by 5% at the announcement of the plans to proceed with a seasoned offering, what is the dollar cost of the announcement effect? Note: Enter your answer in dollars not in millions.
Young Corporation stock currently sells for $40 per share. There are 1 million shares currently outstanding. The company announces plans to raise $5 million by offering shares to the public at a price of $40 per share. a. If the underwriting spread is 6%, how many shares will the company need to issue in order to be left with net proceeds (before other administrative costs) of $5 million? Note: Do not round Intermediate calculations. Round your answer to the nearest whole number. Number of shares b. If the under writing spread is 6% and the other administrative costs are $55,000, what is the dollar value of the total direct costs of the issue? Note: Enter your answer in dollars not in millions. Do not round Intermediate calculations. Round your answer to the nearest whole dollar amount. Total direct costs c. If the share price falls by 5% at the announcement of the plans to proceed with a seasoned offering, what is the dollar cost of the announcement effect? Note: Enter your answer in dollars not in millions.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Young Corporation stock currently sells for $40 per share. There are 1 million shares currently outstanding. The company announces
plans to raise $5 million by offering shares to the public at a price of $40 per share.
a. If the underwriting spread is 6%, how many shares will the company need to issue in order to be left with net proceeds (before
other administrative costs) of $5 million?
Note: Do not round Intermediate calculations. Round your answer to the nearest whole number.
Number of shares
b. If the under writing spread is 6% and the other administrative costs are $55,000, what is the dollar value of the total direct costs
of the issue?
Note: Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to the nearest
whole dollar amount.
Total direct costs
c. If the share price falls by 5% at the announcement of the plans to proceed with a seasoned offering, what is the dollar cost of the
announcement effect?
Note: Enter your answer in dollars not in millions.
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