The Pandora Internet Radio Company was started in 2000 to provide a personalized

Question

The Pandora Internet Radio Company was started in 2000 to provide a personalized radio listening experience over your computer or iPhone and is privately owned. However, its success could easily lead its owners to take the company public with the sale of common stock to the public. When companies sell common stock for the first time the flotation cost can be very high. If Pandora needs $77 million to finance an acquisition and sells shares to the public, how much stock would they have to sell if flotation costs are expected to be 17 percent? The flotation cost adjusted initial outlay is $. (Round to the nearest dollar.)

Explanation / Answer

Floatation cost adjusted initial outlay = Financing need/(1-F) where F is floatation cost as a percent

Hence:
The flotation cost adjusted initial outlay =77/(-0.17)=

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

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