Calculating Costs of Issuing Stock Your Company Needs to Raise

question 48

Multiple Choice

Calculating Costs of Issuing Stock Your company needs to raise $50 million to finance plant expansion.In discussions with its investment bank,you learn that the bankers recommend a gross price of $75 per share and that 675,000 shares of stock be sold.If the net proceeds on the stock sale leave your company with $50 million,what is the underwriter's spread on the stock issue?

• A)$0.93
• B)$1.85
• C)$6.67
• D)$9.00

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Definitions:

Corporate Governance

A system of rules, practices, and processes by which a company is directed and controlled, focusing on balancing the interests of stakeholders.

Financial Intermediary

An institution that acts as a middleman between investors and borrowers, facilitating the flow of funds in the financial market.

Real Estate Brokerage

A service involved in arranging the buying, selling or renting out of properties, utilizing agents or brokers to facilitate transactions between buyers and sellers.

Mortgages

Loans specifically used for purchasing real estate, where the property itself serves as collateral to secure the loan.