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Italian Corporation will issue new common stock shares to raise $70,000,000
Italian Corporation will issue new common stock shares to raise $70,000,000. The planned dividend is $3.25 per share and is expected to increase 4.00 percent per year for the indefinite future. The market price is $70 per share and flotation cost is $5.50 per share. How many shares must Italian Corporation sell to achieve its target funding level? Report the result as a whole number.
Expert Solution
Given,
Amount to raise = $70000000
Market price = $70
Flotation cost = $5.50
Solution :-
Number of shares = Amount to raise/(market price - flotation cost)
= $70000000/($70 - $5.50)
= $70000000/$64.50 = 1085271 shares
Italian corporation must sell 1085271 shares to achieve its target funding level.
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