The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, Wi

Question

The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, Wiley Oakley received $21.05 for each of the 6.59 million shares sold. The initial offering price was $22.90 per share, and the stock rose to $29.41 per share in the first few minutes of trading. Wiley Oakley paid $909,000 in legal and other direct costs and $184,000 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 $21.05 for each of the 6.59 million shares sold. The initial offering price was $22.90 per share, and the stock rose to $29.41 per share in the first few minutes of trading. Wiley Oakley paid $909,000 in legal and other direct costs and $184,000 in indirect costs. (Enter your answer as directed, but do not round intermediate calculations.)

Explanation / Answer

other cost=909000+184000=1093000

Cost of raising fund =(22.9-21.05)*6.59*10^6=12191500

HENCE total floatation cost=12191500+1093000=13284500

% floatation cost=13284500/(22.9*6.59*10^6) *100=8.803%

hence % of floatation cost=1093000/150911000*100=0.724%

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