Howett Pockett, Inc., plans to issue 11.8 million new shares of its stock. In di

Question

Howett Pockett, Inc., plans to issue 11.8 million new shares of its stock. In discussions with its investment bank, Howett Pocket learns that the bankers recommend a net proceed of $37.40 per share and they will charge an underwriter’s spread of 8.0 percent of the gross proceeds. In addition, Howett Pockett must pay $5.2 million in legal and other administrative expenses for the seasoned stock offering.

Calculate the gross proceeds per share. (Round your answer to 2 decimal places.)

Calculate the total funds received by Howett Pockett from the sale of the 11.8 million shares of stock.(Enter your answer in millions of dollars rounded to 3 decimal places.)

Howett Pockett, Inc., plans to issue 11.8 million new shares of its stock. In discussions with its investment bank, Howett Pocket learns that the bankers recommend a net proceed of $37.40 per share and they will charge an underwriter’s spread of 8.0 percent of the gross proceeds. In addition, Howett Pockett must pay $5.2 million in legal and other administrative expenses for the seasoned stock offering.

Explanation / Answer

1

Gross proceeds per share

Gross proceeds = Underwriter’s spread + Net proceeds

Gross proceeds = (0.08*gross proceeds)+$37.40

Gross proceeds - (0.08 × Gross proceeds) = $37.40

Gross proceeds = $37.40/ (1 - 0.08) = $40.65 per share

Ans

Gross proceeds = $40.65

2

Calculation the total funds received by Howett Pockett from the sale of the 11.8 million shares of stock

Funds received = No of shares*Net proceeds per share - expenses

Funds received = (11,800,000*37.40)-5,200,000

Ans

Funds received = 436,120,000

Ans in millions

Funds received =436.12 millions

1

Gross proceeds per share

Gross proceeds = Underwriter’s spread + Net proceeds

Gross proceeds = (0.08*gross proceeds)+$37.40

Gross proceeds - (0.08 × Gross proceeds) = $37.40

Gross proceeds = $37.40/ (1 - 0.08) = $40.65 per share

Ans

Gross proceeds = $40.65

2

Calculation the total funds received by Howett Pockett from the sale of the 11.8 million shares of stock

Funds received = No of shares*Net proceeds per share - expenses

Funds received = (11,800,000*37.40)-5,200,000

Ans

Funds received = 436,120,000

Ans in millions

Funds received =436.12 millions

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