Walls Inc. is a leading German company that wants to expand its business internationally. The proposed expansion would require the firm to raise about $24.7 million in new capital. Because Walls currently has a debt ratio of 35% and because current shareholders already have all their personal wealth invested in the company, they would like to sell common stock to the public to raise the $24.7 million. However, the current shareholders want to retain voting control. The estimated pre-IPO value of equity of the company is about $65 million and there are 1.2 million of existing shares of stock held by current shareholders. The investment bank will charge a 7% spread.

1. To net $24.7 million, what is the total value of stocks that must be sold (approximately)? *

5 points

a. $8.645 million

b. $15.960 million

c. $26.559 million

d. $22.971 million

e. None of the above

2. Which of the following statements is INCORRECT? *

7 points

a. The percentage of shares owned by new investors is 26.60%

b. The new number of shares post-IPO is approximately 1,704,759 shares.

c. The offer price is $52.62 per share

d. The post-IPO value of the firm is $89.7 million.

e. All of the above are correct.