Question

i Camu enterprises needs to raise $25 million to finance its expansion into france. The company will sell new shares of equity ng a general cash uffering to raise the needed funds. Suppose the offer price is $48 per share and the companys underwriters change an 8% spread. The total amount for the direct costs the from reeds to pay for the SEC filing fee, legal and accounting expenses of the offering IS $980,000. How many shares need to be sold so that comu' has the full $25 million after the offering 508, 315 B 605,225 C) 561,413 3 820,833 - ht c) 541,250 - 2) Pecan golf car corp. is expected - to pay an annual dividened et or $1.75 a share next year. The market price of theě stock is $32.60 and the growth rate IS 4% what is the firms cost of equity & 6

Answer 1

Answering Question 1)

Arm &1) Amont raised - to be $ 25 millia othu = enpernes 9.80, bo a ree bling changes. ONMAAILM Amount to be raised afte debiting unduwrity charge = 25 million + 9,80,000 - 2,59,80,00 $ This amount ii 92% of the to tal amout to be raised mia inue as &.l. would be Chaped by debitory underwriters. " via WWW Total amount to be raind issure = 2,59,80,000 / (0.96) - 2,82,39,120.43 No. of shars to be issund - 02,82, 39, 131.43/48 = 588,315 option A

Answering question 2)

This can be solved using the Dividend discount model (Gordon Growth Model).

84 A pu the dividend diswunt model, Po = D. yog whine, D is hext year divided E & is cost of equity g i divided growth rate for dividends Po is the winnent price of Share . for Decen golf car corp. PO = Di

Give and ask for feedback to improve ourselves and others = Pieg Po = + 0.04 1.75 32.60 = = 0.036 +0.04 0.0936 ir- 9.36%. 1 1 Cost of equity is 9.36% 1 1 1 1