Highlander Homes stock trades at $32 per share and there are 50 million shares outstanding.The management would like to raise $200 million in an SEO,and current investors would like to sell $50 million of their own stock.If the underwriter charges 5% of gross proceeds,how many shares must it sell in the total (primary and secondary)offering?

Question

Quizplus · Accepted Answer

To raise $200 million, the company will need to issue (200,000,000 + 0.05 * 200,000,000) / 32 = 6,250,000 new shares, where 0.05 is the underwriter's fee.

To sell $50 million worth of stock, current investors need to sell 50,000,000 /32 = 1,562,500 shares.

Therefore, the total number of shares that need to be sold in the offering is 6,250,000 + 1,562,500 = 7,812,500 shares, which is approximately 8.22 million shares (rounded to two decimal places).

So, the correct answer is C.

Highlander Homes Stock Trades at $32 Per Share and There