Wear Ever is expanding and needs $6.8 million to help fund this growth. The company estimates it can sell new shares of stock for $43 a share. It also estimates it will cost an additional $352,000 for filing and legal fees related to the stock issue. The underwriters have agreed to a spread of 7.5 percent. How many shares of stock must be sold for the company to fund its expansion?

Question

Quizplus · Accepted Answer

Total funds needed = $6.8 million + $352,000 = $7,152,000

Amount raised per share after deducting underwriters' spread = $43 - ($43 x 7.5%) = $39.83

Number of shares needed = $7,152,000 ÷ $39.83 = 179,811 shares (rounded up to the nearest whole number)

Therefore, the answer is C.

Wear Ever Is Expanding and Needs $6