Question

The Raven Co. has just gone public. Under a firm commitment agreement, Raven received 18.50 for...

The Raven Co. has just gone public. Under a firm commitment agreement, Raven received 18.50 for each of the 5 million shares sold. The initial offering price was $20.35 per share, and the stock rose to $26.25 per share in the first few minutes of trading. Raven paid $1,150,000 in direct legal and other costs, and $403,000 in indirect costs. What was the flotation cost as a percentage of funds raised?

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Net amount raised =18.50*5000000 =92500000-1150000-403000 =90947000

share offered at price =20.35

amount received per share =18.50

underwriter spread =20.35-18.50=1.85 =1.85 per shares

total underwriter spread =per share spread*no of shares offered

1.85*5000000 = 9250000

total direct cost =9250000+1150000 =10400000

total direct flotation cost =10400000

indirect flotation cost =indirect cost given +price appreciation

total indirect cost =403000+(26.25-20.35)*5000000 =29903000

total flotation cost =direct cost +indirect cost =10400000+29903000=40303000

total flotation cost as a percentage of fund raised =(40303000/90947000)*100

=44.314%

Add a comment
Know the answer?
Add Answer to:
The Raven Co. has just gone public. Under a firm commitment agreement, Raven received 18.50 for...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • The Raven Co. has just gone public. Under a firm commitment agreement, Raven received $17.40 for each of the 20 million shares sold. The initial offering price was $19.50 per share, and the stock...

    The Raven Co. has just gone public. Under a firm commitment agreement, Raven received $17.40 for each of the 20 million shares sold. The initial offering price was $19.50 per share, and the stock rose to $21.60 per share in the first few minutes of trading. Raven paid $600,000 in direct legal and other costs and $200,000 in indirect costs. What was the flotation cost as a percentage of funds raised? (Do not round intermediate calculations and enter your answer...

  • The Sugarland Co. has just gone public. Under a firm commitment agreement, the company received $32.80...

    The Sugarland Co. has just gone public. Under a firm commitment agreement, the company received $32.80 for each of the 4.18 million shares sold. The initial offering price was $35.20 per share, and the stock rose to $42.60 per share in the first few minutes of trading. The company paid $913,000 in legal and other direct costs and $266,000 in indirect costs. What was the flotation cost as a percentage of funds raised? (Do not round intermediate calculations and enter...

  • The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, the company received...

    The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, the company received $20.65 for each of the 6.55 million shares sold. The initial offering price was $22.50 per share, and the stock rose to $29.01 per share in the first few minutes of trading. The company paid $905,000 in legal and other direct costs and $180,000 in indirect costs. What was the flotation cost as a percentage of funds raised? (Do not round intermediate calculations and...

  • The Collins Co. has just gone public. Under a firm commitment agreement, the company received $32.10...

    The Collins Co. has just gone public. Under a firm commitment agreement, the company received $32.10 for each of the 4.11 million shares sold. The initial offering price was $34.50 per share, and the stock rose to $41.20 per share in the first few minutes of trading. The company paid $906,000 in legal and other direct costs and $252,000 in indirect costs. What was the flotation cost as a percentage of funds raised? (Do not round intermediate calculations and enter...

  • Bellevue Co. has just gone public. Under a firm commitment agreement, the company received $17.40 for...

    Bellevue Co. has just gone public. Under a firm commitment agreement, the company received $17.40 for each of the 20 million shares sold. The initial offering price was $19.50 per share and the stock rose to $21.60 per share in the first few minutes of trading. The company paid $600,000 in direct legal and other costs and $200,000 in indirect costs. What was the flotation cost as a percentage of funds raised? (Do not round intermediate calculations and enter your...

  • The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, the company received...

    The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, the company received $20.45 for each of the 6.53 million shares sold. The initial offering price was $22.30 per share, and the stock rose to $28.81 per share in the first few minutes of trading. The company paid $903,000 in legal and other direct costs and $178,000 in indirect costs. What was the flotation cost as a percentage of funds raised? (Do not round intermediate calculations and...

  • The Green Hills Co. has just gone public. Under a firm commitment agreement, Green Hills received...

    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...

  • The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, Wiley received $21.39 for each of the 7.7...

    The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, Wiley received $21.39 for each of the 7.75 million shares sold. The initial offering price was $23 per share, and the stock rose to $26.30 per share in the first few minutes of trading. Wiley paid $1,350,000 in legal and other direct 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...

  • The Collins Co. has just gone public. Under a firm commitment agreement, the company received $32.70...

    The Collins Co. has just gone public. Under a firm commitment agreement, the company received $32.70 for each of the 4.17 million shares sold. The initial offering price was $35.10 per share, and the stock rose to $42.40 per share in the first few minutes of trading. The company paid $912,000 in legal and other direct costs and $264,000 in indirect costs. What is the net amount raised? (Do not round intermediate calculations. Enter your answer in dollars, not millions...

  • The Boeing Company has just gone public under a firm commitment agreement and sold (i.e. floated)...

    The Boeing Company has just gone public under a firm commitment agreement and sold (i.e. floated) 4.1 million shares to the public. Boeing stock went public (i.e. begin to trade over the exchange) at $34.40. The first day closing price of Boeing stock was $41 per share. Boeing paid $905,000 in legal and other direct costs, $250,000 in indirect costs, and an underwriter’s fee of $2.40 per share. Required: i. Compute the net amount raised by the Boeing Company as...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT