Dixon Corporation is considering a public offering of common stock. The firm will offer one million shares of common stock for sale. The estimated selling price is $30 per share with Dixon Corp. receiving $26.25 per share after the offering. Registration fees are estimated at $275,000. What is the spread in percent? What are the total expenses for the issue? If Dixon Corp. needs to generate $28 million, how many shares will have to be sold?
To find the spread in percent, we need to calculate the difference between the estimated selling price and the amount received by Dixon Corp. after the offering, and then express it as a percentage of the estimated selling price:
Spread = (Estimated Selling Price - Amount Received) / Estimated Selling Price
Spread = ($30 - $26.25) / $30
Spread = $3.75 / $30
Spread ≈ 0.125 or 12.5% (rounded to two decimal places)
To find the total expenses for the issue, we need to add the registration fees to the amount received by Dixon Corp.:
Total Expenses = Amount Received + Registration Fees
Total Expenses = $26.25 + $275,000
Total Expenses = $275,000 + $26.25
Total Expenses = $301,250
To calculate the number of shares that need to be sold in order to generate $28 million, we divide the desired amount by the amount received per share:
Number of Shares = Desired Amount / Amount Received per Share
Number of Shares = $28,000,000 / $26.25
Number of Shares ≈ 1,066,667 (rounded to the nearest whole number)
Therefore, Dixon Corp. will need to sell approximately 1,066,667 shares to generate $28 million.
To find the spread in percent, you need to calculate the difference between the estimated selling price and the amount Dixon Corp. receives per share after the offering, divided by the estimated selling price, and multiplied by 100.
Spread in percent = ((Estimated selling price - Amount Dixon Corp. receives) / Estimated Selling Price) * 100
Spread in percent = (($30 - $26.25) / $30) * 100
Spread in percent = ($3.75 / $30) * 100
Spread in percent = 0.125 * 100
Spread in percent = 12.5%
To find the total expenses for the issue, you need to add the registration fees to the amount Dixon Corp. receives per share after the offering and multiply it by the number of shares being offered.
Total expenses for the issue = (Registration fees + Amount Dixon Corp. receives) * Number of shares being offered
Total expenses for the issue = ($275,000 + $26.25) * 1,000,000
Total expenses for the issue = $301,250,000
To find how many shares will have to be sold to generate $28 million, you need to divide the amount Dixon Corp. needs to generate by the amount Dixon Corp. receives per share after the offering.
Number of shares = Amount Dixon Corp. needs to generate / Amount Dixon Corp. receives
Number of shares = $28,000,000 / $26.25
Number of shares = 1,066,667 shares (rounded to the nearest whole number)