In: Finance
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?
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 | |||