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

Question

The Raven Co. has just gone public. Under a firm commitment agreement, Raven received $15.40 for each of the 20 million shares sold. The initial offering price was $16.70 per share, and the stock rose to $18.10 per share in the first few minutes of trading. Raven paid $560,000 in direct legal and other costs and $180,000 in indirect costs.

What was the flotation cost as a percentage of funds raised? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

The Raven Co. has just gone public. Under a firm commitment agreement, Raven received $15.40 for each of the 20 million shares sold. The initial offering price was $16.70 per share, and the stock rose to $18.10 per share in the first few minutes of trading. Raven paid $560,000 in direct legal and other costs and $180,000 in indirect costs.

Explanation / Answer

The company received proceeds of $15.40 x 200,00,000 = 30,80,00,000

It cost the company $1.30/share in underwriting cost, times 20 million shares = $2,60,00,000.

Flotation cost as a percentage: 260,00,000/30,80,00,000 = 0.08441558= 8.442%

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.