The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, th
ID: 2794892 • Letter: T
Question
The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, the company received $21.75 for each of the 6.66 million shares sold. The initial offering price was $23.60 per share, and the stock rose to $30.11 per share in the first few minutes of trading. The company paid $916,000 in legal and other direct costs and $191,000 in indirect costs.
What is the net amount raised? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.)
Net amount raised $
What are the total direct costs? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.)
Direct costs $
What are the total indirect costs? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.)
Indirect costs $
What are the total costs? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.)
Total 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.)
Flotation cost percentage %
Explanation / Answer
What is the net amount raised?
Net amount raised = Number of shares sold * price received by the company - Costs associated with the offer (legal and other direct costs and indirect costs)
= (6,660,000 shares *$21.75) – ($916,000 + $191,000)
= $144,855,000 – $1,107,000
= $143,748,000
What are the total direct costs?
Direct costs = Different between initial offering price and received price multiplied by number of shares + Company paid in legal and other direct costs
= ($23.60 - $21.75) * 6,660,000 shares + $916,000
= $12,321,000 +$916,000
= $13,237,000
What are the total indirect costs?
Indirect costs = Immediate price appreciation + other indirect costs
= ($30.11 - $23.60) * 6,660,000 shares + $191,000
= $43,356,600 + $191,000
= $43,547,600
What are the total costs?
Total costs = direct cost + indirect cost
= $13,237,000 +$43,547,600
= $56,784,600
What was the flotation cost as a percentage of funds raised?
Flotation cost percentage = Total cost / Net amount raised
=$56,784,600/ $143,748,000
=0.3950 or 39.50%
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