Phillip's Manufacturing wants to raise $15 million to open a new production center. The company estimates the issue costs including the legal and accounting fees will be $530,000. The underwriters have set the stock price at $23 a share and the underwriting spread at 8.5 %. How many shares of stock does Phillip's have to sell to meet their cash need?

Question

Quizplus · Accepted Answer

To find the number of shares, calculate the net proceeds per share by subtracting the underwriting spread (8.5% of $23) from the stock price, then add the issue costs to the $15 million needed and divide by the net proceeds per share.

Phillip's Manufacturing Wants to Raise $15 Million to Open a New