Flotation Costs. Young Corporation stock currently sells for $30 per share. There are 1 million shares currently

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Flotation Costs. Young Corporation stock currently sells for $30 per share. There are 1 million shares currently outstanding. The company announces plans to raise $3 million by offering shares to the public at a price of $30 per share.

a. If the underwriting spread is 8 percent, how many shares will the company need to issue in order to be left with net proceeds of $3 million?

b. If other administrative costs are $60,000 what is the dollar value of the total direct costs of the issue?

c. If the share price falls by 3 percent at the announcement of the plans to proceed with a seasoned offering, what is the dollar cost of the announcement effect?

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Study Guide To Accompany Fundamentals Of Corporate Finance

ISBN: 9780073012421

5th Edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus

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