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Number of Shares required to be sold

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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Solution Preview

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 ...

Solution Summary

This provides the steps to calculate the shares must the firm sell to net $20 million after underwriting and flotation expense

$2.19