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Finance Questions on Shares of Company

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Enter formulas to solve the requirements of this problem.

a. How many shares would the company have needed to issue to raise the same amount of money?
Shares issued formula.

b. How much more would the existing shareholders have made from the sale?
Additional proceeds formula.

c. What would have been the change in the value of the shares that they did not sell? Hint: What was the
market value of Microsoft's total outstanding stock? Would that value change if the company had raised the
same amount of money from the underwriters?

Market Value of Microsoft Stock (after offering) $836,500,000
Total number of shares outstanding 23,193,000
Market Value per share FORMULA
Offering Price $35.00
Difference per share ($35.00)
Unsold shares 21,100,000
Value of unsold shares would be higher by ($738,500,000)

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Solution Summary

The expert determines how many shares would a company have needed to issue to raise the same amount of money. The existing shareholders which have made the sale are determined.

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a. How many shares would the company have needed to issue to raise the same amount of money?
Shares issued FORMULA = Amount of money/issue price = $738,500,000/36.07 = 20,474,079 shares

b. How much more would the existing shareholders have made from the sale? ...

Solution provided by:
Ashish Sharma, MBA (IP)
Education
  • MBA (IP), International Center for Internationa Business
  • BBA, University of Rajasthan
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