The Collins Co. has just gone public. Under a firm commitment agreement, Collins

Question

The Collins Co. has just gone public. Under a firm commitment agreement, Collins received $32.30 for each of the 4.13 million shares sold. The initial offering price was $34.70 per share, and the stock rose to $41.60 per share in the first few minutes of trading. Collins paid $908,000 in legal and other direct costs and $256,000 in indirect costs. (Enter your answer as directed, but do not round intermediate calculations.)

Required: 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).)

Explanation / Answer

Amount received=32.30*4130000(A) 133399000 Amount paid=908000+256000(B) 1164000 Floatation cost=B/A in % 0.873

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