Calculating Costs of Issuing Stock Blue Dragon, Inc., needs to raise $600 million to finance its plan for nationwide expansion. In discussions with its investment bank, Blue Dragon's learns that the bankers recommend an offer price (or gross price) of $60 per share and they will charge an underwriter's spread of $3.00 per share. Calculate the net proceeds to Blue Dragon's from the sale of stock. How many shares of stock will Blue Dragon's need to sell in order to receive the $600 million they need?

Question

Quizplus · Accepted Answer

Net proceeds = gross price - underwriter's spread
Net proceeds = $60 - $3.00 = $57.00 per share

Number of shares needed to sell = Amount needed / Net proceeds per share
Number of shares needed to sell = $600,000,000 / $57.00 = 10,526,316 shares

Therefore, the best choice is B, which is the number of shares Blue Dragon's needs to sell to receive the $600 million they need.