WuShock, Inc., needs to raise $500 million to finance its plan for nationwide expansion. In discussions with its investment bank, WuShock learns that the bankers recommend an offer price (or gross price) of $50 per share and they will charge an underwriter's spread of $2.00 per share. Calculate the net proceeds to WuShock from the sale of stock. How many shares of stock will WuShock need to sell in order to receive the $500 million they need?

Question

Quizplus · Accepted Answer

The net proceeds per share to WuShock from the sale of stock would be the offer price minus the underwriter's spread, which is $50 - $2 = $48 per share. To raise $500 million, WuShock would need to sell $500 million / $48 per share = 10,416,667 shares.