Calculating Costs of Issuing Stock Wildcat, Inc., needs to raise $750 million to finance its plan for nationwide expansion. In discussions with its investment bank, Wildcat's learns that the bankers recommend an offer price (or gross price) of $25 per share and they will charge an underwriter's spread of $1.50 per share. Calculate the net proceeds to Wildcat's from the sale of stock. How many shares of stock will Wildcat's need to sell in order to receive the $750 million they need?
A) 30,000,000
B) 31,914,894
C) 500,000,000
D) 750,000,000

Question

Quizplus · Accepted Answer

To calculate the net proceeds, we need to subtract the underwriter's spread from the gross price per share:

Net Price = Gross Price - Underwriter's Spread
Net Price = $25 - $1.50
Net Price = $23.50

Now we can calculate the number of shares needed to raise $750 million:

Shares = Amount to Raise / Net Price per Share
Shares = $750,000,000 / $23.50
Shares = 31,914,894

Therefore, Wildcat's needs to sell 31,914,894 shares of stock to raise the $750 million they need. The answer is option B.