The Huang Corporation needs to raise $85 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. If the offer price is $16 per share and the company' s underwriters charge a spread of 8 percent, how many shares need to be sold?

To determine the number of shares The Huang Corporation needs to sell to raise $85 million, we must first consider the spread charged by the underwriters, which is 8 percent. The spread is the difference between the offer price and the price at which the underwriters purchase the shares from the company.8

Given the offer price is $16 per share, the underwriters' spread of 8 percent would be calculated as follows:$ \text{Spread} = \text{Offer Price} \times \text{Spread Percentage} $$ \text{Spread} = 16 \times 0.08 = $1.28 $8

This means the underwriters will purchase each share for $16 -$1.28 = $14.72.8

Now, to find out how many shares need to be sold to raise $85 million, we divide the total amount needed by the net proceeds per share (the offer price minus the spread):$ \text{Number of Shares} = \frac{\text{Total Amount Needed}}{\text{Net Proceeds per Share}} $$ \text{Number of Shares} = \frac{85,000,000}{14.72} \approx 5,777,777.78 $8

Since the number of shares cannot be a fraction, The Huang Corporation would need to sell approximately 5,777,778 shares to raise the $85 million required for its expansion into new markets, considering the underwriters' spread of 8 percent.8