Stanley's Flags Wants to Raise $5 Million to Open a New

question 275

Multiple Choice

Stanley's Flags wants to raise $5 million to open a new distribution center. The company estimates the issue costs including the legal and accounting fees will be $210,000. The underwriters have set the stock price at $18 a share and the underwriting spread at 7.5 %. How many shares of stock does Stanley's have to sell to meet its cash need?

• A) 269,251 shares
• B) 300,300 shares
• C) 310,872 shares
• D) 311,153 shares
• E) 312,913 shares

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Definitions:

Loss on Sale of Receivables

A financial loss incurred when the sale price of accounts receivable is less than their carrying amount on the balance sheet.

Allowance for Doubtful Accounts

A contra-asset account that reduces the total accounts receivable on the balance sheet, accounting for estimated uncollectible debts.

Interest Income

The revenue earned from deposit accounts or investments through the receipt of interest payments.

Fair Value Option

An accounting strategy that allows companies to measure and report certain financial assets and liabilities at their fair values.