The Eagle Company whose stock is $30 needs to raise $15 million by issueing common stock. Underwriters have informed Eagle's management that it must price the new issue to the public at $27.53 per share to ensure that all shares are sold.
The underwriters compensation will be 7 percent of the issue price, so Eagle will net $25.60 per share. In addition, the company will also incur expenses in the amount of $360,000. How many shares must Eagle sell to net $15 million after underwriting and flotation expenses?
Any help you can offer would be greatly appreciated. Thanks!
2007-01-20 05:10:53 · 1 answers · asked by Tori 3 in Education & Reference ➔ Homework Help
600,000 shares
(Amount needed to raise + Extra fees)/Proceeds per share net of undwriting = Number of shares
(15m + 360k)/$25.60 = 600k shares
2007-01-20 12:34:55 · answer #1 · answered by csanda 6 · 1⤊ 0⤋