The Dunning Co. needs to raise $65.8 million to finance its expansion into new m
ID: 2759192 • Letter: T
Question
The Dunning Co. needs to raise $65.8 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 $58 per share and the company’s underwriters charge a spread of 8 percent. The SEC filing fee and associated administrative expenses of the offering are $458,000. (Enter your answer as directed, but do not round intermediate calculations.)
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).)
The Dunning Co. needs to raise $65.8 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 $58 per share and the company’s underwriters charge a spread of 8 percent. The SEC filing fee and associated administrative expenses of the offering are $458,000. (Enter your answer as directed, but do not round intermediate calculations.)
Explanation / Answer
1.
Required proceeds = Amount required for financing the expansion + Underwriter’s spread + Administrative costs
Required proceeds = $65,800,000 + (0.08 * Required proceeds) + $458,000
Required proceeds – (0.08*Required proceeds) = $66,258,000
0.92*Required proceeds = $66,258,000
Required proceeds = $66,258,000/0.92 = $72,019,565.22
2.
Price per share = $58
No. of shares to be sold = $72,019,565.22/$58 = 1,241,717 shares
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