Question

In: Finance

Howett Pockett, Inc., plans to issue 10.1 million new shares of its stock. In discussions with...

Howett Pockett, Inc., plans to issue 10.1 million new shares of its stock. In discussions with its investment bank, Howett Pocket learns that the bankers recommend a net proceed of $34.00 per share and they will charge an underwriter’s spread of 6.0 percent of the gross proceeds. In addition, Howett Pockett must pay $3.5 million in legal and other administrative expenses for the seasoned stock offering.

Calculate the gross proceeds per share. (Round your answer to 2 decimal places.)

  Gross proceeds $  per share  

Calculate the total funds received by Howett Pockett from the sale of the 10.1 million shares of stock.(Enter your answer in millions of dollars rounded to 3 decimal places.)

  Funds received by Howett Pockett $  m  

Solutions

Expert Solution

No of shares           10,100,000
Net proceed                          34
Underwriter commission 6%
Net proceeds 10100000*34
Net proceeds         343,400,000
Underwriter commission 6%
Gross proceeds 343400000/94%
Gross proceeds     365,319,148.9
Gross proceeds per share 365319148/10100000
Gross proceeds per share                     36.17
Net proceed         343,400,000
Legal expense             3,500,000
Funds received by HP         339,900,000

Related Solutions

CFO of Graham Del plans to have the company issue $500 million of new common stock...
CFO of Graham Del plans to have the company issue $500 million of new common stock and use the proceeds to pay off some of its outstanding bonds. Assume that the company, which does not pay any dividends, takes this action, and that total assets, operating income (EBIT), and its tax rate all remain constant. What affect it can have on the company’s financial statements. Discuss.
CFO of Graham Del plans to have the company issue $500 million of new common stock...
CFO of Graham Del plans to have the company issue $500 million of new common stock and use the proceeds to pay off some of its outstanding bonds. Assume that the company, which does not pay any dividends, takes this action, and that total assets, operating income (EBIT), and its tax rate all remain constant. What affect it can have on the company’s financial statements. Discuss.
24. Stock Value and Leverage.  Green Manufacturing, Inc.,plans to announce that it will issue $1.6 million of...
24. Stock Value and Leverage.  Green Manufacturing, Inc.,plans to announce that it will issue $1.6 million of perpetual debt and use the proceeds to repurchase common stock.  The bonds will sell at par with an annual coupon rate of 6 percent.  The company is currently an all-equity firm worth $7.7 million with 260,000 shares of common stock outstanding.  After the sale of the bonds, the company will maintain the new capital structure indefinitely.  The company currently generates annual pretax earnings of $1.86 million.  This level of...
Cost of Capital: Cost of New Common Stock If a firm plans to issue new stock,...
Cost of Capital: Cost of New Common Stock If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. There are two approaches to use to account for flotation costs. The first approach is to add the sum of flotation costs for the debt, preferred, and common stock and add them to the initial investment cost. Because the investment cost is increased, the project's expected return is reduced so it may not meet the...
Answer the following questions Al Safa Inc. plans to issue new bonds to finance its new...
Answer the following questions Al Safa Inc. plans to issue new bonds to finance its new project. In its efforts to price the issue, Al-Safa has identified a company of similar risk with an outstanding bond issue that has an 8 percent coupon rate having a maturity of ten years. This firm's bonds are currently selling for $1,091.96. If interest is paid annually for both bonds, what must the coupon rate of the new bonds be in order for the...
Dinklage Corp. has 10.1 million shares of common stock outstanding. The current share price is $53,...
Dinklage Corp. has 10.1 million shares of common stock outstanding. The current share price is $53, and the book value per share is $4. The company also has two bond issues outstanding. The first bond issue has a face value of $83 million, has a 7 percent coupon, and sells for 91 percent of par. The second issue has a face value of $60.6 million, has a 7 percent coupon, and sells for 93.9 percent of par. The first issue...
The Cost of Capital: Cost of New Common Stock If a firm plans to issue new...
The Cost of Capital: Cost of New Common Stock If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. There are two approaches to use to account for flotation costs. The first approach is to add the sum of flotation costs for the debt, preferred, and common stock and add them to the initial investment cost. Because the investment cost is increased, the project's expected return is reduced so it may not meet...
The Cost of Capital: Cost of New Common Stock If a firm plans to issue new...
The Cost of Capital: Cost of New Common Stock If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. There are two approaches to use to account for flotation costs. The first approach is to add the sum of flotation costs for the debt, preferred, and common stock and add them to the initial investment cost. Because the investment cost is increased, the project's expected return is reduced so it may not meet...
Fairyland Inc. has 4 million shares of common stock outstanding, 1 million shares of preferred stock...
Fairyland Inc. has 4 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 200 thousand bonds. The common shares are selling for $25 per share, the preferred share are selling for $10 per share, and the bonds are selling for 95 percent of their $1,000 par. (See P10-3 for formula to calculate weights). A. What would be the weight used for equity in the computation of FarCry’s WACC? B. What weight should you use for...
OMG Inc. has 6 million shares of common stock outstanding, 5 million shares of preferred stock...
OMG Inc. has 6 million shares of common stock outstanding, 5 million shares of preferred stock outstanding, and 7,000 bonds. Suppose the common shares sell for $17 per share, the preferred shares sell for $16 per share, and the bonds sell for 108 percent of par. What weight should you use for preferred stock in the computation of OMG’s WACC? (Round your answer to 2 decimal places.)
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT