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Magenta Corporation wants to raise $51

Finance

Magenta Corporation wants to raise $51.3 million in a seasoned equity offering, net of all fees. Magenta stock currently sells for $10 per share. The underwriters will require a spread of $0.5 per share, and indicate that the issue must be underpriced by 5 percent. In addition to the underwriter’s fee, the firm will incur $2,300,000 in legal, accounting, and other costs. How many shares must Magenta sell? (Enter your answer in millions rounded to 3 decimal places.)

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Net sale price per share = (10-0.50)*(1-5%)

= $ 9.025

Company must raise = Net Fund Required +  legal, accounting, and other costs

  = 51.3 M + 2.3 M

  = $ 53.6 M

No of shares must Magenta sell = Amount Required / Sale price per share

= 53,600,000/9.025

= 5,939,058.172