The Dunning Co Needs To Raise 667 Million To Finance 600185

Question

The Dunning Co Needs To Raise 667 Million To Finance Its Expansi The Dunning Co. needs to raise $66.7 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. The offer price is $67 per share and the company’s underwriters charge a spread of 8.5 percent. The SEC filing fee and associated administrative expenses of the offering are $467,000. Required: What are the required proceeds from the sale necessary for the company to pay the underwriter's spread and administrative costs? (Enter your answer as directed, but do not round intermediate calculations.) Required proceeds_______________________________ How many shares need to be sold? (Enter the whole number for your answer, not millions (e.g., 1,234,567). Round your answer to the nearest whole number (e.g., 1,234,567).) Number of shares offered_________________________ 2. The Elkmont Corporation needs to raise $52.2 million to finance its expansion into new markets. The company will sell new shares of equity via general cash offering to raise the needed funds. The offer price is $38 per share and the company’s underwriters charge a spread of 7 percent. The SEC filing fee and associated administrative expenses of the offering are $1,462,000. (Enter your answer as directed, but do not round intermediate calculations.) Required: What are the required proceeds from the sale necessary for the company to pay the underwriter's spread and administrative costs? (Enter the whole number for your answer, not millions (e.g., 1,234,567). Round your answer to the nearest whole number (e.g., 1,234,567).) Required proceeds $ _________________________ How many shares need to be sold? (Enter the whole number for your answer, not millions (e.g., 1,234,567). Round your answer to the nearest whole number (e.g., 1,234,567).) Number of shares offered $_______________________ 3. The Collins Co. has just gone public. Under a firm commitment agreement,

Dr. Jack HW Helper · Accepted Answer

Raising capital through equity issuance is a fundamental strategic decision for companies seeking to fund expansion projects, acquire assets, or improve liquidity. This paper analyzes three specific scenarios where firms—The Dunning Co., Elkmont Corporation, and Collins Co.—raise funds via different equity issuance methods, examining the calculation of proceeds, costs, and overall implications on their financial strategies. 1. Determining Required Proceeds and Share Offering for The Dunning Co. The Dunning Company's plan to raise $66.7 million involves issuing new shares at an offer price of $67 per share with an underwriting spread of 8.5%. The primary challenge is to determine the gross proceeds necessary to cover the desired net funds, underwriting costs, and administrative expenses. First, calculating the total amount needed involves adding administrative costs to the net proceeds. Administrative costs are given as $467,000, and the aim is to ensure that after deducting the underwriter’s spread and these expenses, the company still receives $66.7 million. The underwriters' spread is 8.5% of the gross amount sold, which is calculated as: Total gross proceeds (G) = $\frac{\text{Net funds needed} + \text{Administrative costs}}{1 - \text{Spread}}$ Plugging in the values: G = $\frac{66,700,000 + 467,000}{1 - 0.085}$ ≈ $\frac{67,167,000}{0.915}$ ≈ \$73,388,524 However, since the proceeds are based on a per-share offer price, the number of shares to be sold is: Number of shares = Total gross proceeds / Offer price = \$73,388,524 / \$67 ≈ 1,095,443 shares Total proceeds from the sale, accounting for the spread, then become: Required proceeds (net of spread and costs) = Total gross proceeds - underwriters’ spread - administrative costs ≈ \$73,388,524 - (8.5% of \$73,388,524) - \$467,000. But more precisely, the company's calculation should aim to find the gross amount such that after deducting the spread and costs, the net is $66.7 million. Therefore, the required

The Dunning Co Needs To Raise 667 Million To Finance 600185

The Dunning Co Needs To Raise 667 Million To Finance Its Expansi

Paper For Above instruction

1. Determining Required Proceeds and Share Offering for The Dunning Co.

2. Financial Calculations for Elkmont Corporation

3. Analysis of Collins Co. IPO

Conclusion

References