Wear Ever is expanding and needs $12.6 million to help fund this growth. The firm estimates it can sell new shares of stock for $32.50 a share. It also estimates it will cost an additional $340,000 for filing and legal fees related to the stock issue. The underwriters have agreed to a 7.5 percent spread. How many shares of stock must Wear Ever sell if it is going to have $12.6 million available for its expansion needs?

Question

Quizplus · Accepted Answer

Total value of issue = ($12,600,000 + $340,000)/(1 - 0.075) = $13,989,189.19Number of shares needed = $13,989,189.19/$32.50 = 430,437 shares

Wear Ever Is Expanding and Needs $12