Calculating Costs of Issuing Stock Paige's Purses, Inc

question 69

Multiple Choice

Calculating Costs of Issuing Stock Paige's Purses, Inc., needs to raise $30 million in new capital funding from a seasoned equity offering. In discussions with its investment bank, Paige learns that the bankers recommend a gross price of $25.00 per share and they will charge an underwriter's spread of $2.00 of the gross price. In addition, Paige must pay $2 million in legal and other administrative expenses for the seasoned stock offering. What is the number of shares of stock that Paige will need to sell to raise the $30 million?

• A) 1,391,305
• B) 1,280,000
• C) 1,120,000
• D) 1,127,392

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Definitions:

Operating Activities

Business activities directly related to the production, sale, and delivery of a company's products or services, generating the majority of its revenue and expenses.

Cash Dividends

Cash dividends are payments made by a corporation to its shareholders, usually as a distribution of profits.

Free Cash Flow

A measure of financial performance calculated as operating cash flow minus capital expenditures, representing the cash that a company is able to generate after spending the money required to maintain or expand its asset base.

Capital Expenditures

Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment.