Winter's Edge needs $45 million to finance a new facility and new snow removal equipment. The management has met with underwriters who feel that the firm could sell additional shares of stock at $26 a share with an 8 % underwriting spread. The estimated issue costs are $475,000. How many shares of stock will Winter's Edge need to sell if they choose firm commitment underwriting for their new facility and equipment?

Question

Quizplus · Accepted Answer

To find the number of shares, calculate the net proceeds per share: $26 - (8% of $26) = $23.92. Then, calculate the total amount needed: $45,000,000 + $475,000 = $45,475,000. Finally, divide the total amount by the net proceeds per share: $45,475,000 / $23.92 ≈ 1,901,129 shares.

Winter's Edge Needs $45 Million to Finance a New Facility