Question

The Green Hills Co. has just gone public. Under a firm commitment agreement, Green Hills received $15.50 for each of the 20 million shares sold. The initial offering price was $17.10 per share, and the stock rose to $19.90 per share in the first few minutes of trading. Green Hills paid $620,000 in direct legal and other costs and $210,000 in indirect costs. What was the flotation cost as a percentage of funds raised? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Flotation cost %

Answer 1

Number of shares sold by the company = 20,000,000

Money received by the company for 1 share = $15.5

Total Funds raised = Number of shares * Money received for 1 share

= 20,000,000 * $15.5 = $310,000,000

Legal & other costs = $620,000

Indirect costs = $210,000

Total floating cost = $620,000 + $210,000 = $830,000

Floating Cost as a percent of the fund raised = ($830,000 / $310,000,000) x 100

= 0.27%