ZuoTi.Pro
Question

U3 needs $192 million to stay in business. If it issues new common stock to raise...

U3 needs $192 million to stay in business. If it issues new common stock to raise the funds, the flotation costs will be 8%. The new issue will also require U3 to pay $280,000 in fees to its lawyers, printing cost, and other costs associated with the issue. U3 can issue stock at $25 per share. How many shares of common stock must U3 issue so that $192 million after flotation costs? Show how much of the total dollar amount of the issue will be flotation costs and how much U3 will receive after the flotation costs are paid.

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Flotation Cost = 8%

Total Amount Raised = x

So,

x = 192,000,000 + 0.08x + 280,000

x = 192,280,000/0.92

x = $209,000,000

Number of Shares to be issued = 209,000,000/25

Number of Shares to be issued = 8,360,000

0 0
Add a comment
Know the answer?
Add Answer to:
U3 needs $192 million to stay in business. If it issues new common stock to raise...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 1-Bushwhacker Mowing needs $360 million to support growth. If it issues new common stock to raise...

    1-Bushwhacker Mowing needs $360 million to support growth. If it issues new common stock to raise the funds, the flotation (issuance) costs will be 4 percent. If Bushwhacker can issue stock at $60 per share, how many shares of common stock must be issued so that it has $360 million after flotation costs? Show how much of the issue will consist of flotation costs and how much Bushwhacker will receive after flotation costs are paid. 2-Mom's Motel Corporation (MM) plans...

  • 3-19 Mom's Motel Corporation (MM) plans to issue bonds to raise $175 million that it needs...

    3-19 Mom's Motel Corporation (MM) plans to issue bonds to raise $175 million that it needs to support future operations. MM's investment banker will charge 2.5 percent of the total amount issued to help MMM raise the funds. In addition, MM will incur other costs associated with the issue that total $500,000. The market value of each bond at issue time will be $1,000. How many bonds must MM sell to net $175 million after flotation costs? Assume that fractions...

  • 3-15 16 Boat Emporium (BE) must raise $225 million. To do so, BE expects to issue...

    3-15 16 Boat Emporium (BE) must raise $225 million. To do so, BE expects to issue new common stock. BE's Investment banker will charge issuing costs equal to 10 percent of the total amount issued. If the stock can be issued for $160 per share, how many shares must BE sell to net $225 million after flotation costs. Show how much of the issue will consist of flotation costs and how much BE will receive after the flotation costs are...

  • Disturbed Corp. needs to raise $56.5 million to fund a new project. The company will sell...

    Disturbed Corp. needs to raise $56.5 million to fund a new project. The company will sell shares at a price of $23.60 in a general cash offer and the company's underwriters will charge a spread of 7 percent. The direct flotation costs associated with the issue are $700,000 and the indirect costs are $435,000. How many shares need to be sold? Multiple Choice 2,265,167 shares 2,510,024 shares 2,254,673 shares 2,625,980 shares 2,394,068 shares

  • Jenny Corp. needs to raise $49.5 million to fund a new project. The company will sell...

    Jenny Corp. needs to raise $49.5 million to fund a new project. The company will sell shares at a price of $28.30 in a general cash offer and the company's underwriters will charge a spread of 6 percent. The direct flotation costs associated with the issue are $750,000. How many shares need to be sold? Multiple Choice 1,650,110 shares 1,888,956 shares 1,819,036 shares 1,749,117 shares 1,699,613 shares

  • Disturbed Corp. needs to raise $56 million to fund a new project. The company will sell...

    Disturbed Corp. needs to raise $56 million to fund a new project. The company will sell shares at a price of $23.50 in a general cash offer and the company's underwriters will charge a spread of 6.5 percent. The direct flotation costs associated with the issue are $675.000 and the indirect costs are $425.000 How many shares need to be sold? Multiple Choice 2.382.979 shares O 2.264,509 shares O 2.598.703 shares 0 2254520 shares 0 2.490.841 res

  • 40 Jenny Corp. needs to raise $56 million to fund a new project. The company will...

    40 Jenny Corp. needs to raise $56 million to fund a new project. The company will sell shares at a price of $29.60 in a general cash offer and the company's underwriters will charge a spread of 6.5 percent. The direct flotation costs associated with the issue are $1,075,000. How many shares need to be sold? 1 Multiple Choice eBook 0 1,977,074 shares 0 1,891,892 shares 0 1,834,158 shares 0 1,776,424 shares • 2,062,256 shares

  • Underwriting and Flotation Expenses The Beranek Company, whose stock price is now $30, needs to raise...

    Underwriting and Flotation Expenses The Beranek Company, whose stock price is now $30, needs to raise $30 million in common stock. Underwriters have informed the firm's management that they must price the new issue to the public at $26 per share because of signaling effects. The underwriters' compensation will be 4% of the issue price, so Beranek will net $24.96 per share. The firm will also incur expenses in the amount of $170,000. How many shares must the firm sell...

  • Underwriting and Flotation Expenses The Beranek Company, whose stock price is now $30, needs to raise...

    Underwriting and Flotation Expenses The Beranek Company, whose stock price is now $30, needs to raise $30 million in common stock. Underwriters have informed the firm's management that they must price the new issue to the public at $26 per share because of signaling effects. The underwriters' compensation will be 4% of the issue price, so Beranek will net $24.96 per share. The firm will also incur expenses in the amount of $170,000. How many shares must the firm sell...

  • Cost of new common stock A firm needs to take flotation costs into account when it...

    Cost of new common stock A firm needs to take flotation costs into account when it is raising capital fromissuing new common stock . True or False: The following statement accurately describes how firms make decisions related to issuing new common stock. If a firm needs additional capital from equity sources once the retained earnings breakpoint is reached, it will have to raise the capital by issuing new common stock. True: Firms will raise all the equity they can from...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT