(20–2)

Underwriting and Flotation Expenses The Beranek Company, whose stock price is now $25, needs to raise $20 million in common stock. Underwriters have informed the firm’s management that they must price the new issue to the public at $22 per share because of signaling effects. The Chapter 20: Initial Public Offerings, Investment Banking, and Financial Restructuring 819 underwriters’ compensation will be 5% of the issue price, so Beranek will net $20.90 per share. The firm will also incur expenses in the amount of $150,000.

How many shares must the firm sell to net $20 million after underwriting and flotation expenses?