Question

In: Finance

Corp is planning to issue a stock to finance a new operations facility, the projected cost...

Corp is planning to issue a stock to finance a new operations facility, the projected cost of the facility is $278 million, additional flotation costs are $1 million and the underwriter's fee is 7% What will be the size of the stock offering? How many shares of stock can they issue if the stock sells for $80 per share?

Solutions

Expert Solution

Total cost without underwritting = cost of project + flotation cost
=$278000000+1000000
=279000000
Stock size should be = Total cost /(1- underwriting commission)
=$279000000/(1-0.07)
=$30000000 or 300 million
Number of shares =$30000000/$80
=375000 shares

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