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 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 from the sale of stock.How many shares of stock will Wildcat 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 to Wildcat, we need to subtract the underwriter's spread from the gross price per share:

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

Now, we can calculate the number of shares Wildcat needs to sell to raise $750 million:

Total amount needed to be raised = $750 million

Net proceeds per share = $23.50

Number of shares = Total amount to be raised / Net proceeds per share 
= $750,000,000 / $23.50 
= 31,914,894 shares

Therefore, the best choice is B.