1. The Dunning Co. needs to raise $66.7 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 $67 per
share and the company’s underwriters charge a spread of 8.5 percent. The SEC
filing fee and associated administrative expenses of the offering are $467,000.
(Enter your answer as directed, but do not round intermediate calculations.)
Required:
What are the
required proceeds from the sale necessary for the company to pay the
underwriter's spread and administrative costs? (Enter the whole number for your
answer, not millions (e.g., 1,234,567). Round your answer to the nearest whole
number (e.g., 1,234,567).)
Required proceeds_______________________________
How many shares
need to be sold? (Enter the whole number for your answer, not millions (e.g.,
1,234,567). Round your answer to the nearest whole number (e.g., 1,234,567).)
Number of shares offered_________________________
2. The Elkmont Corporation needs to raise $52.2 million to finance its
expansion into new markets. The company will sell new shares of equity via general
cash offering to raise the needed funds. The offer price is $38 per share and
the company’s underwriters charge a spread of 7 percent. The SEC filing fee and
associated administrative expenses of the offering are $1,462,000. (Enter your
answer as directed, but do not round intermediate calculations.)
Required:
What are the required
proceeds from the sale necessary for the company to pay the underwriter's
spread and administrative costs? (Enter the whole number for your answer, not
millions (e.g., 1,234,567). Round your answer to the nearest whole number
(e.g., 1,234,567).)
Required proceeds $
_________________________
How many shares need to be
sold? (Enter the whole number for your answer, not millions (e.g., 1,234,567).
Round your answer to the nearest whole number (e.g., 1,234,567).)
Number of shares offered $_______________________
3. The Collins Co. has just gone public. Under a firm commitment
agreement, Collins received $33.40 for each of the 4.24 million shares sold.
The initial offering price was $35.80 per share, and the stock rose to $43.80
per share in the first few minutes of trading. Collins paid $919,000 in legal and
other direct costs and $278,000 in indirect costs. (Enter your answer as
directed, but do not round intermediate calculations.)
Required:
What is the net amount
raised? (Enter the whole number for your answer, not millions (e.g.,
1,234,567). Round your answer to the nearest whole number (e.g., 1,234,567).)
Net amount raised $______________________
What are the total direct
costs? (Enter the whole number for your answer, not millions (e.g., 1,234,567).
Round your answer to the nearest whole number (e.g., 1,234,567).)
Direct costs $ __________________________
What are the total
indirect costs? (Enter the whole number for your answer, not millions (e.g.,
1,234,567). Round your answer to the nearest whole number (e.g., 1,234,567).)
Indirect costs $ __________________________
What are the total
costs?(Enter the whole number for your answer, not millions (e.g., 1,234,567).
Round your answer to the nearest whole number (e.g., 1,234,567).)
Total costs $ __________________________
What was the flotation
cost as a percentage of funds raised? (Enter your answer as a percentage
rounded to 2 decimal places (e.g., 32.16).)
Flotation cost percentage
$______________________
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