Blue Corporation stock currently sells for $80 per share. There are 4 million shares currently outstanding. The
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Question:
Blue Corporation stock currently sells for $80 per share. There are 4 million shares currently outstanding. The company announces plans to raise $1 million by offering shares to the public at a price of $80 per share.
If the underwriting spread is 10 %, how many shares will the company need to issue in order to be left with net proceeds of$1 million?
If other administrative costs are $90,000, what is the dollar value of the total direct costs of the issue? Assume that 13,889 shares are issued.
If the share price falls by 2.5 % at the announcement of the plans to proceed with a seasoned offering, what is the dollar cost of the announcement effect to existing shareholders?
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