General cash offering: Dragon Company, an auto fuel cell maker, is planning a new plant and needs to raise $30 million to finance it. The company plans to raise the money through a general cash offering priced at $23.50 a share. Star's underwriters charge a 6 per cent spread. How many shares does the company have to sell to achieve its goal?

Question

Quizplus · Accepted Answer

The correct answer is A.The company needs to raise $30 million. The offering is priced at $23.50 a share. The underwriters charge a 6% spread. This means that the company will receive $22.17 per share ($23.50 - $23.50 x 0.06). To raise $30 million, the company needs to sell 1,358,081 shares ($30,000,000 / $22.17).

General Cash Offering: Dragon Company, an Auto Fuel Cell Maker