stockholders in a company own 500 shares. There is a new public issue is there with 600 shares. Each share price will be traded at $20 with a 4% spread. The costs will be $400,000. Calculate the net proceeds?
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Answer:
11120000
Step-by-step explanation:
Note:- There is a mistake in question. I assume number of shares are 500K & 600K and not 500 & 600. Answer with updated numbers.
Total Shares - 600000 shares
Public Price - $ 20
Total Cash - 600000 x 20 = $ 12000,000
Registration Cost = $ 400,000
Net proceeds = [ Shares issued * Share price * (1 - Spread ) ] - Direct costs
Net Proceeds = [ 600000 * 20 * (1 - 0.04 ) ] - 400,000 = 11120000
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