EBK CFIN
6th Edition
ISBN: 9781337671743
Author: BESLEY
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 3, Problem 18PROB
Summary Introduction
BM needs $360 million to support growth. To raise the needed funds, the flotation cost is 4% of the total issue value and other expenses are $288,000. The market price of each share is $60. Calculate the number of outstanding shares.
Equity financing is the process of raising equity capital by issuing shares to investors due to short-term need or long-term goal or for the future growth of the firm.
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Bushwhacker Mowing needs $360 million to support growth. If it issues new common stock to raise the funds, the issuing cost charged by the investment banker will be 4 percent. Additional costs associated with the issue will total $288,000. If Bushwhacker can issue stock at $60 per share, how many shares of common stock must be issued so that it has $360 million after flotation costs? Show how much of the issue will consist of flotation costs and how much Bushwhacker will receive after flotation costs are paid.
Global Gum Company (GGC) has decided to issue $150 million in common stock toraise funds to finance future growth. GGC’s stock currently sells for $25 per share.a. How many shares of stock does GGC plan to issue?b. If flotation costs are 8 percent, how much of the $150 million will GGC beable to use to fund growth?
Anderson Anchor Corporation needs to raise $54 million to support its expansionplans. Anderson’s investment banker normally charges 10 percent of themarket value to handle an equity issue. If the price of Anderson’s stock isexpected to be $12, how many shares of stock must be issued so that thecompany receives the needed $54 million?
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