Question: Your firm needs to raise $5 million. Floatation costs are expected to be $10 per share and current market price of the stock is $100 per share. Determine the number of shares issued and the dollar size of the issue.
I don't really know where to begin. I would assume that the "profit" per share would be $90 (100-10), but $5 million / $90 = 55,555 and 5/9 shares. Can it be that simple? If so, would the dollar size just be $90? what am I missing? There are no examples like this in my textbook.
I don't really know where to begin. I would assume that the "profit" per share would be $90 (100-10), but $5 million / $90 = 55,555 and 5/9 shares. Can it be that simple? If so, would the dollar size just be $90? what am I missing? There are no examples like this in my textbook.