Flagler Inc. needs to raise $11.6 million, including all accounting and legal fees, to finance its expansion so has decided to sell new shares of equity via a general cash offering. The offer price is $22.50 per share and the underwriting spread is 7.85 percent. How many shares need to be sold?

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The correct answer is A.The underwriting spread is the percentage of the offer price that the underwriter receives as compensation for its services. In this case, the underwriting spread is 7.85 percent, which means that the underwriter will receive $1.765 per share ($22.50 x 7.85%).The net proceeds from the offering will be $11.6 million, which means that the number of shares that need to be sold is $11.6 million / $20.735 per share = 559,474 shares.