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 your
answer as a percent rounded to 2 decimal places, e.g.,
32.16.)
Flotation cost percentage %
Homework Answers
Net amount raised = (4,110,000 × $32.10) - $906,000 - $252,000 = $130,773,000
Total costs = $906,000 + $252,000 + [($41.20 - 34.50) × 4,110,000] = $28,695,000
Flotation cost percentage = $28,695,000 / $130,773,000 = 21.94%
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