Wear Ever is expanding and needs $6.8 million to help fund this growth. The company estimates it can sell new shares of stock for $43 a share. It also estimates it will cost an additional $352,000 for filing and legal fees related to the stock issue. The underwriters have agreed to a spread of 7.5 percent. How many shares of stock must be sold for the company to fund its expansion?

a. 170,376
b. 185,127
c. 179,811
d. 154,209
e. 61,806

Question

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Respuesta :

andromache andromache · Answer 1 · 2020-12-11T01:28:23+01:00

Answer:

c. 179,811

Explanation:

The computation of the number of shares of stock sold for expansion is shown below:

The Number of shares is

= (Fund for growth + Legal and filing fees) ÷ Net price after underwriter spread

= ($6,800,000 + $352,000) ÷ (43 × (1 - 7.5%))

= $7,152,000 ÷ $39.775

= 179,811 shares

Hence, the correct option is c.

We simply applied the above formula so that the correct value could come

And, the same is to be considered