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Homework answers / question archive / 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

Finance

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.

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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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