The Dunning Co. needs to raise $66.9 million to finance its expansion into new m
ID: 2735631 • Letter: T
Question
The Dunning Co. needs to raise $66.9 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. The offer price is $69 per share and the company's underwriters charge a spread of 9.5 percent. The SEC filing fee and associated administrative expenses of the offering are $469,000. (Enter your answer as directed, but do not round intermediate calculations.) Required: What are the required proceeds from the sale necessary for the company to pay the underwriter's spread and administrative costs? (Enter the whole number for your answer, not millions (e.g., 1, 234, 567). Round your answer to the nearest whole number (e.g., 1, 234, 567).) How many shares need to be sold? (Enter the whole number for your answer, not millions (e.g., 1, 234, 567). Round your answer to the nearest whole number (e.g., 1, 234, 567).)Explanation / Answer
Value of fund raise = $66.90 million
Filling cost = $469,000
Underwriting cost = 9.5%
Total Value of fund raise = ($66,900,000 + $469,000) / (1 - 9.5%)
= $67,369,000 / 0.905
= $74,440,883.98.
Required proceed from sale of equity for company to pay underwriting fee and other feeling cost is $74,440,883.98.
b.
Sale price of one share = $69
Total Proceed from sale of equity = $74,440,883.98.
Number of share issued = $74,440,883.98 / $69
= 1,078,854
Hence, total number of share issued is 1,078,854.
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