The Bud Wise Co.needs to raise $125 million to expand their operations into Asia.The company will sell new shares via a general cash offering to raise the necessary funds.The underwriters charge a 7.5 per cent fee and the administrative costs are $600 000.How many shares of stock must be sold at the offer price of $31?

Question

Quizplus · Accepted Answer

The total cost of raising $125 million is:

$125,000,000 + ($125,000,000 x 7.5%) + $600,000 = $135,937,500

To determine the number of shares needed to reach this amount, we divide the total cost by the offer price:

$135,937,500 ÷ $31 = 4,380,645.16

Therefore, the company needs to sell approximately 4,380,122 shares of stock to raise $125 million after accounting for the underwriters' fee and administrative costs. The closest answer choice is B.