Canadian Copper stock trades at $22.50 per share and there are 82 million shares outstanding.The management would like to raise $300 million in an SEO and current investors would like to sell $40 million of their own stock.If the underwriter charges 5% of gross proceeds,how many shares must it sell in the total (primary and secondary)offering?

Question

Quizplus · Accepted Answer

The correct answer is A.The total amount of money that needs to be raised is $300 million + $40 million = $340 million. The underwriter charges 5% of gross proceeds, so the gross proceeds must be $340 million / (1 - 0.05) = $357.89 million. The number of shares that must be sold is $357.89 million / $22.50 = 15.9 million shares.

Canadian Copper Stock Trades at $22