Importers/Exporters Inc. wants to underwrite a stock issue for the purchase of $
ID: 2755034 • Letter: I
Question
Importers/Exporters Inc. wants to underwrite a stock issue for the purchase of $21 million of new equipment. Management estimates the issue will cost the firm $320,000 for accounting, legal, and other costs. The underwriting spread is 7.5% and the issue price is $22/share. How many shares of stock must be sold to receive sufficient funds to purchase all the equipment? men one or me Touching selections will Increasing the debt-equity ratio Redeeming shares of common stoch Issuing new bonds at par Increasing the firm's beta Increasing the firm's tax rate Which one of the following selections will increase the firm's weighted average cost of capital if a firm has a cost of equity of 13%, a cost of preferred of 11 %, and an aftertax cost of debt of 6%? Increasing the accounts receivable turnover rate will decrease the operating cycle. Stock prices tend to following the announcement of a new debt issue and following the announcement of a new equity issue.Explanation / Answer
1)
Amount required to purchase the equipment = $21,000,000.
Cost incurred = $320,000
Total Proceeds = $21,320,000.
Issue price = $22.
NUmber of shares to be issued = (21,320,000/22)*100/92.5 = 1,047,666 shares
therefore, the correct answer is option C.
NOte:
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