Star Corporation, 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 percent spread. How many shares does the company need to sell to achieve its goal? (Round your final answer to the nearest unit of share.)

Question

Quizplus · Accepted Answer

The correct answer is A.The underwriters' spread is 6%, which means that the underwriters will receive 6% of the proceeds of the offering. Therefore, the company will need to sell $30 million / (1 - 0.06) = $32,075,472 worth of shares. At a price of $23.50 per share, the company will need to sell 32,075,472 / 23.50 = 1,358,081 shares.

Star Corporation, an Auto Fuel Cell Maker, Is Planning a New