Mountain Teas wants to raise $11.6 million to open a new production center.The company estimates the issue costs including the legal and accounting fees will be $440,000.The underwriters have set the stock price at $17.50 a share and the underwriting spread at 9 percent.How many shares of stock does Mountain Teas have to sell to meet its cash need?

Question

Quizplus · Accepted Answer

Total value of issue = ($11,600,000 + $440,000)/(1 - 0.09) = $13,230,769Number of shares needed = $13,230,769/$17.50 = 756,044 shares

Mountain Teas Wants to Raise $11