Young Corporation stock currently sells for $20 per share. There are 1 million shares currently...
Question:
Young Corporation stock currently sells for $20 per share. There are 1 million shares currently outstanding. The company announces plans to raise $4 million by offering shares to the public at a price of $20 per share.
a. If the underwriting spread is 6%, how many shares will the company need to issue in order to be left with net proceeds of $4 million? (Do not round intermediate calculations. Round your answer to the nearest whole number.)
b. If other administrative costs are $85,000, what is the dollar value of the total direct costs of the issue? (Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)
c. If the share price falls by 4% at the announcement of the plans to proceed with a seasoned offering, what is the dollar cost of the announcement effect? (Enter your answer in dollars not in millions.)
Issued Shares:
Issued shares indicate the number of shares detained by the shareholders. It consists of the entire number of shares held by the public, employees of the company, and institutional investors. Issued shares must primarily be authorized and sanctioned by the management of the company.
Answer and Explanation: 1
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{eq}\begin{align*} {\rm\text{Number of shares to be issued}}\, &= \,\frac{{{\rm\text{Net proceeds}}}}{{\left( {{\rm\text{Issue price}}\, -...
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