Howett Pockett, Inc., plans to issue 12.0 million new shares of its stock. In di
ID: 2743682 • Letter: H
Question
Howett Pockett, Inc., plans to issue 12.0 million new shares of its stock. In discussions with its investment bank, Howett Pocket learns that the bankers recommend a net proceed of $37.80 per share and they will charge an underwriter’s spread of 8.0 percent of the gross proceeds. In addition, Howett Pockett must pay $5.4 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 12.0 million shares of stock.(Enter your answer in millions of dollars rounded to 3 decimal places.)
Howett Pockett, Inc., plans to issue 12.0 million new shares of its stock. In discussions with its investment bank, Howett Pocket learns that the bankers recommend a net proceed of $37.80 per share and they will charge an underwriter’s spread of 8.0 percent of the gross proceeds. In addition, Howett Pockett must pay $5.4 million in legal and other administrative expenses for the seasoned stock offering.
Explanation / Answer
1
Calculation of gross proceeds per share:
Net Proceed per share
$ 37.80
Underwriter’s spread (8.0 percent of the gross proceeds) = 37.8*8/92 =
$ 3.29
Gross Proceed per share = 37.80 + 3.29 =
$ 41.09
2
Calculation of total funds received by Howett Pockett from the sale of the 12.0 million shares of stock:
Amount in Millions
Number of shares sold (Million)
$ 12.000
Net Proceed per share
$ 37.800
Total Net Proceed = 12 Million Shares * $37.80 =
$ 453.600
Less: legal and other administrative expenses
$ 5.400
Total funds received
$ 448.200
Million
1
Calculation of gross proceeds per share:
Net Proceed per share
$ 37.80
Underwriter’s spread (8.0 percent of the gross proceeds) = 37.8*8/92 =
$ 3.29
Gross Proceed per share = 37.80 + 3.29 =
$ 41.09
2
Calculation of total funds received by Howett Pockett from the sale of the 12.0 million shares of stock:
Amount in Millions
Number of shares sold (Million)
$ 12.000
Net Proceed per share
$ 37.800
Total Net Proceed = 12 Million Shares * $37.80 =
$ 453.600
Less: legal and other administrative expenses
$ 5.400
Total funds received
$ 448.200
Million
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