Number of Shares required to be sold
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The Berenek Company, whose stock price is now $25, needs to raise $20 million in common
stock. Underwritters have informed the firms management that they must price the new issue
to the public at $22 per share because of signaling effects. The underwritters compensation will
be 5% of the issue price so Beranek will net $20.90 per share. The firm will also incur expenses
in the amount of $150,000.
How many shares must the firm sell to net $20 million after underwriting and flotation expenses?
Please see the attached excel file.
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This provides the steps to calculate the shares must the firm sell to net $20 million after underwriting and flotation expense
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The Berenek Company, whose stock price is now $25, needs to raise $20 million in common
stock. Underwritters have informed the firms management that they must price the new issue
to the ...
Purchase this Solution
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