The Bread Basket needs to raise $38 million to expand its operations nationally.The company will sell new shares of common stock using a general cash offering.The underwriters charge a 7.65 percent spread,the administrative costs are $395,000,and the offer price is $25 per share.How many shares of stock must be sold for The Bread Basket to receive the total funds it desires?

Question

Quizplus · Accepted Answer

The total cost of selling new shares of common stock is the sum of underwriters spread and administrative costs, which is (0.0765*38,000,000) + 395,000 = $3,128,700.
To find the number of shares required, we divide the total cost of selling shares by the offer price per share: 
Total shares required = ($38,000,000 + $3,128,700) / $25 = 1,663,022 shares. 
Therefore, the number of shares of stock that must be sold for The Bread Basket to receive the total funds it desires is 1,663,022 shares.

The Bread Basket Needs to Raise $38 Million to Expand