Beth's Bulk Foods wants to raise $4 million to open a new retail outlet. The company estimates the issue costs including the legal and accounting fees will be $280,000. The underwriters have set the stock price at $23 a share and the underwriting spread at 8 %. How many shares of stock does Beth's have to sell to meet the cash need?

Question

Quizplus · Accepted Answer

To calculate the number of shares, first determine the net proceeds per share: $23 - (8% of $23) = $21.16. Then, calculate the total funds needed: $4,000,000 + $280,000 = $4,280,000. Finally, divide the total funds needed by the net proceeds per share: $4,280,000 / $21.16 ≈ 202,269 shares.

Beth's Bulk Foods Wants to Raise $4 Million to Open