Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Chapter 18, Problem 2P
Summary Introduction
To determine: The number of shares to be sold.
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Students have asked these similar questions
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?
Midland 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…
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. $56,851,955.35
Chapter 18 Solutions
Intermediate Financial Management (MindTap Course List)
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