The Elkmont Corporation needs to raise $52.1 million to finance its expansion in

Question

The Elkmont Corporation needs to raise $52.1 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 $37 per share and the company’s underwriters charge a spread of 9.5 percent.

How many shares need to be sold? (Do not round intermediate calculations and enter your answer in shares, not millions of shares, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.)

Number of shares offered            

Explanation / Answer

Total proceeds needed to be raised net of spread=$52.1million/(1-spread rate)

=$52.1million/(1-0.095)

$57,569,060.77

Hence number of shares to be sold= $57,569,060.77/$37

=1555921 shares(Approx).

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