Wear Ever is expanding and needs $12.6 million to help fund this growth.The firm estimates it can sell new shares of stock for $35 a share.It also estimates it will cost an additional $340,000 for filing and legal fees related to the stock issue.The underwriters have agreed to a 7 percent spread.How many shares of stock must Wear Ever sell if it is going to have $12.6 million available for its expansion needs?

Question

Quizplus · Accepted Answer

Total value of issue = ($12,600,000 + $340,000)/(1 - 0.07) = $13,913,978.49Number of shares needed = $13,913,978.49/$35 = 397,542.24 shares

Wear Ever Is Expanding and Needs $12