Brown Ltd has decided to raise capital by issuing 200 new shares.Marketing Ltd has prepared a report to Brown Ltd listing the following potential investors together with the number of shares each is prepared to purchase at the following price:

At what price should Brown issue in order to maximise the amount of capital to be raised?

Question

Brown Ltd has decided to raise capital by issuing 200 new shares.Marketing Ltd has prepared a report to Brown Ltd listing the following potential investors together with the number of shares each is prepared to purchase at the following price:

At what price should Brown issue in order to maximise the amount of capital to be raised?

Quizplus · Accepted Answer

To maximize the amount of capital raised, Brown should issue shares at the highest price possible while still satisfying demand.

At a price of $160, only 100 shares would be purchased for a total of $16,000.

At a price of $170, only 150 shares would be purchased for a total of $25,500.

At a price of $180, all 200 shares would be purchased for a total of $36,000.

Therefore, the best choice is to issue shares at a price of $180.

Option D cannot be chosen because there is no information to suggest that the price should be greater than $180 in order to maximize the capital to be raised.

Brown Ltd Has Decided to Raise Capital by Issuing 200