Question

The Zuri Co. needs to raise $66.6 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. The offer price is $66 per share and the company’s underwriters charge a spread of 8 percent.

How many shares need to be sold?

Number of shares offered:

Answer 1

Amount to be raised = $66,600,000
Underwriter spread = 8%
Price per share = $66

Actual amount to be raised = Amount to be raised / (1 - Underwriter spread)
Actual amount to be raised = $66,600,000 / (1 - 0.08)
Actual amount to be raised = $66,600,000 / 0.92
Actual amount to be raised = $72,391,304.35

Number of shares offered = Actual amount to be raised / Price per share
Number of shares offered = $72,391,304.35 / $66
Number of shares offered = 1,096,838