The Dunning Co. needs to raise $65.3 million to finance its expansion into new m

ID: 2736132 • Letter: T

Question

The Dunning Co. needs to raise $65.3 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 $53 per share and the company's underwriters charge a spread of 9.5 present. The SEC filing fee and associated administrative expenses of the offering are $453, 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

Computation of to pay the underwriter’s spread and administrative costs:

Details

Amount

Underwriters charge ($65.3 million * 9.5%)

$ 6,203,500

Administrative expenses

$ 453,000

Total cost for raising funds

$ 6,656,500

Computation of how many shares need to be sold:

Number of shares sold = $65.3 million /$53

= 1.306 million shares