Question

NU-Tech wants to raise $11.6 million to purchase equipment by issuing new securities. Management estimates the issue will cost the firm $785,000 for accounting, legal, and other costs. The underwriting spread is 7.5 percent and the issue price is $23 per share. How many shares of stock must be sold if the firm is to have sufficient funds remaining after costs to purchase all of the desired equipment?

Answer 1

Answer:

$582,139

Explanation:

NU-Tech

Number of shares

= [($11,600,000 + 785,000)/(1 -.075)] / $23

= 582,139

Therefore the 582,139 shares of stock must be sold if the firm is to have sufficient funds remaining after costs to purchase all of the desired equipment.