Niagara Vineyards and Winery needs to raise $2 million in new equity.
a. If the costs of the share issue are estimated to be 7 percent of gross proceeds, how large does the offering need to be? How much will Niagara pay in flotation costs?
b. If the underwriters give a discount and only charge 5 percent of gross proceeds, how large does the offering need to be? How much will Niagara save on flotation costs?