Chipper's Golf Resort has learned that Tiger Woods is interested in putting his name on golf course designs;however,in order for any golf course to be acceptable to him,it will cost a minimum of $20 million to build.Chipper's owners want an international presence,and they believe that,"just the way golf club companies became publicly traded corporations,it may be time for golf courses to do the same." The plan is to begin to purchase real estate for four new golf resorts.Proceeding with their venture,the owners have calculated that they will need approximately $100 million.But putting together an IPO is another matter.After meeting with their investment banker,they believe that investors will be willing to pay $16/share for the IPO.As the ___________ for this issue,the investment bank requires 3% of the revenues generated by the sale.Chipper's will need to issue _______ shares in order to have the $100 million they need to proceed with their plan.

Question

Quizplus · Accepted Answer

The investment bank serving as the underwriter requires 3% of the revenues generated by the sale, which means that Chipper's needs to generate $103 million in revenue to meet their funding needs. Dividing $103 million by $16 per share, Chipper's needs to issue more than 6.25 million shares to generate the necessary revenue, making option A the correct answer. Option C and D can be eliminated as they require an unrealistic number of shares to be issued. As for option B, it suggests that exactly 6.25 million shares are needed for funding; however, this is not accurate as Chipper's need to generate slightly over $100 million.

Chipper's Golf Resort Has Learned That Tiger Woods Is Interested