Question
United Uninsured Underwriters U3 needs $192 million to stay in business. If new common stock is issued, U3 must pay its investment banker a fee
United Uninsured Underwriters U3 needs
$192
million to stay in business. If new common stock is issued, U3 must pay its investment banker a fee equal to 8 percent of the total amount issued. The new issue will also require U 3 to pay
$280,000
in fees to its lawyers, printing costs, and other costs associated with the issue. U3 can issue stock at
$25
per share. How many shares of common stock must U3 issue so that it has
$192
million after flotation costs? Show how much of the total dollar amount of the issue will be flotation costs and how much 13 will receive after the flotation costs are paid.
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