contestada

Persian Rugs needs $600 million to support growth next year. If it issues new common
stock to raise the funds, the flotation (issuance) costs will be 4 percent. If Persian can issue
stock at $125 per share, how many shares of common stock must be issued so that it has
$600 million after flotation costs to use for its planned growth?

Respuesta :

Samawati

Answer:

4, 992,000 shares

Explanation:

Amount that need to be raised: $600

flotation cost 4 percent:

Actual flotation cost: =4/100 x $600

                                     =0.04 x $600

                                     =$24 million

Total amount that must be arise = $600 +$24

                                                      =$624

Value per share $125

Number of shares need to raise $624million = $624,000,000/$125

                                                                            =4, 992,000 shares

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