Carbon8 Corporation wants to raise $120 million in a seasoned equity offering,net of all fees.Carbon8 stock currently sells for $28.00 per share.The underwriters will require a fee of $1.25 per share,and indicate that the issue must be underpriced by 7.5%.In addition to the underwriter's fee,the firm will incur $785,000 in legal,administrative,and other costs.How many shares must Carbon8 sell in order to raise the desired amount of capital?

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The price will be set at 7.5% below the current price,or at 0.925 × 28.00 = $25.90.The underwriters will take $1.25 per share,leaving $24.65/share for Carbon8.Carbon8 needs to earn $120,785,000 at $24.65/share,so it must sell 120.785mil/24.65 = 4.9 million shares.

Carbon8 Corporation Wants to Raise $120 Million in a Seasoned