The Sullivan Co. needs to raise $65.4 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 $54 per share and the company’s underwriters charge a spread of 8 percent. How many shares need to be sold?

Since 8% shares are already taken b underwriters, the Compay needs to sell 92% of shares. So 92% of total amount (65.4 million) is $ 60.168 million. We will divide the amount by price per share of $54 to get amount of shares needed to be sold. So after dividing is $ 60.168 million by $54, we get 1.11 million shares which is the answere.

marvineetesh3 marvineetesh3 · Answer 2 · 2022-01-29T14:32:54+01:00

The Sullivan Co. needs to raise $65.4 and the company’s underwriters charge a spread of 8 %, then The Company requires selling 1.11 million shares.

Computation of shares need to be sold:

8% shares are already taken by underwriters(according to the question)

Then, the Company needs to sell 92% of shares. (100%-8%)

So, the value of 92% of the share :

[tex]\text{Remaining amount for distribution}=\text{Remaining percentage}\times\text{Total amount of finance}\\\\\text{Remaining amount for distribution}=\dfrac{92}{100}\times\$65.4\text{Millions}\\\\\text{Remaining amount for distribution}=\$60.168\text{Millions}.[/tex]

So, per-share price will be:

[tex]\text{Per share price}=\dfrac{\text{Total share price}}{\text{Per-share price}}\\\\\text{Per share price}=\dfrac{\$60.168}{\$54} \text{Millions}\\\\\text{Per share price}=\$1.11\text{Millions}[/tex]

Therefore, for raising $65.4 and the company’s underwriters charge a spread of 8 %, The Company requires selling 1.11 million shares.

Learn more about shares, refer:

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