The Elkmont Corporation needs to raise $51.4 million to finance its expansion in

Question

The Elkmont Corporation needs to raise $51.4 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 $30 per share and the company's underwriters charge a spread of 9 percent. The SEC filing fee and associated administrative expenses of the offering are $ 1,454,000. Required: What are the required proceeds from the sale necessary for the company to pay the underwriter s spread and administrative costs? Required proceeds $ How many shares need to be sold? Number of shares offered

Explanation / Answer

Proceeds from the sales Let the proceeds be x 51400000+.09x+1454000 = x .91x = 52854000 x = 52854000/.91 58081319 The required proceeds from the sale should be $ 58081319 No of shares = 58081319/30 1936044 196044 shares need to be sold

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