The flotation cost as a % of funds raised is computed as shown below:
Net amount raised is computed as follows:
= $ 21.39 x 7.75 million shares
= $ 165,772,500
The direct cost is computed as shown below:
= ( $ 23 - $ 21.39 ) x 7.75 million shares + $ 1,350,000
= $ 13,827,500
The indirect cost is computed as shown below:
= ( $ 26.30 - $ 23 ) x 7.75 million shares + $ 210,000
= $ 25,785,000
Total cost is computed as follows:
= $ 13,827,500 + $ 25,785,000
= $ 39,612,500
So the flotation cost as a % of funds raised will be:
= $ 39,612,500 / $ 165,772,500
= 23.90% Approximately
Feel free to ask in case of any query relating to this question
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