7. value: 10.00 points The Wiley Oakley Co. has just gone public. Under a firm c

Question

7.

value:
10.00 points

The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, Wiley Oakley received $31.75 for each of the 7.3 million shares sold. The initial offering price was $34 per share, and the stock rose to $43.85 per share in the first few minutes of trading. Wiley Oakley paid $1,350,000 in legal and other direct costs and $210,000 in indirect costs.(Enter your answer as directed, but do not round intermediate calculations.)

What was the flotation cost as a percentage of funds raised? (Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, Wiley Oakley received $31.75 for each of the 7.3 million shares sold. The initial offering price was $34 per share, and the stock rose to $43.85 per share in the first few minutes of trading. Wiley Oakley paid $1,350,000 in legal and other direct costs and $210,000 in indirect costs.(Enter your answer as directed, but do not round intermediate calculations.)

Explanation / Answer

It cost the company $2.25/share in underwriting cost, times 7.3 million shares = $16,425,000.
Add the legal costs of $1,350,000 plus the indirect costs of $210,000 for a total cost of $17,985,000.

The company received proceeds of $31.75 x 7,300,000 = $231,775,000.

Flotation cost as a percentage: 17,985,000/231,775,000 = 0.07760 = 7.76%

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