Question

Problem 18-04 Calculating Costs of Issuing Stock (LG18-4) Don's Captain Morgan, Inc. needs to ralse $13.20 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 $2110 per share and Don's will recerve $19.15 per share. Calculate the underwriter's spread per share on the Issue. (Round your answer to 2 decimal places.) Underwriter's spread per share How many shares of stock will Don's need to sell in order to receive the $13 20 millon it needs? (Round your answer to the nearest whole number.) Number of shares sold shares nces

Answer 1

The underwriter spread is the difference between the offer price and the price he will receive Spread per share = 21.10-19.15 1.95 In order to be able to receive 13200000, the number of shares he will have to sell is 13200000/19.15 689295 He will offer approximately 689295 shares at 21.10 so that he can receive his required amount after the spread.