Don’s Captain Morgan, Inc. needs to raise $12.70 million to finance plant expansion. In discussions with...
Don’s Captain Morgan, Inc. needs to raise $12.70 million to finance plant expansion. In discussions with its investment bank, Don’s learns that the bankers recommend an offer price (or gross proceeds) of $20.60 per share and Don’s will receive $16.75 per share.
Calculate the underwriter’s spread per share on the issue. (Round your answer to 2 decimal places.)
How many shares of stock will Don’s need to sell in order to receive the $12.70 million it needs? (Round your answer to the nearest whole number.)
Homework Answers
Underwriter’s spread = Gross proceeds - Net proceeds = $20.60 per share – $16.75 per share = $3.85 per share
Funds needed = $12,700,000 = $16.75 per share × Number of shares sold
Number of shares sold = $12,700,000 / $16.75 per share = 758,209 shares
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