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How many shares will the company need to issue

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Question - Young Corporation stock currently sells for $35 per share. There are 1 million shares currently outstanding. The company announces plans to raise $4 million by offering shares to the public at a price of $35 per share.

a. If the underwriting spread is 6%, how many shares will the company need to issue in order to be left with net proceeds (before other administrative costs) of $4 million?

b. If the under writing spread is 6% and the other administrative costs are $60,000, what is the dollar value of the total direct costs of the issue?

c. If the share price falls by 8% at the announcement of the plans to proceed with a seasoned offering, what is the dollar cost of the announcement effect?

Reference no: EM133128280

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