Criswell Mining shares trade at $18 per share and there are 200 million shares outstanding. The management would like to raise $100 million in an SEO. If the underwriter charges 5% of gross proceeds, how many shares must it sell?

Question

Quizplus · Accepted Answer

The underwriter's fee is 5% of gross proceeds, so the net proceeds to Criswell Mining will be $100 million / (1 - 0.05) = $105.26 million. The number of shares that must be sold is $105.26 million / $18 per share = 5.85 million shares.

Criswell Mining Shares Trade at $18 Per Share and There