The Educated Horses Corporation needs to raise $20 million to finance its expansion into new markets.The company will sell new shares of equity via a general cash offering to raise the needed funds.Suppose the offer price is $40 per share and the company's underwriters charge an 8 percent spread.The SEC filing fee and associated administrative expenses of the offering are $660,000.How many shares need to be sold?

Question

Quizplus · Accepted Answer

Required sales proceeds: $20m + $0.66m = x (1 - 0.08); x = $22,456,522Number of shares needed = $22,456,522/$40 = 561,413

The Educated Horses Corporation Needs to Raise $20 Million to Finance