Laura's Design is about to go public.Its present shareholders own 800,000 shares.The new public issue will represent 1,200,000 shares.The shares will be priced at $30 to the public with a 5% spread.The out-of pocket costs will be $700,000.What are the net proceeds to the firm?
A) $34,200,000
B) $36,000,000
C) $33,500,000
D) $11,400,000

Question

Quizplus · Accepted Answer

The total number of shares after the public issue will be 800,000 + 1,200,000 = 2,000,000 shares.
The 5% spread on the $30 price per share is $1.50 per share.
Hence, the net proceeds to the firm will be:
($30 - $1.50) x 1,200,000 - $700,000 = $33,500,000.

Laura's Design Is About to Go Public