Question

The Westlands Co. has just gone public. Under a firm commitment agreement, the company received $15.70...

The Westlands Co. has just gone public. Under a firm commitment agreement, the company received $15.70 for each of the 10 million shares sold. The initial offering price was $19.10 per share, and the stock rose to $21.00 per share in the first few minutes of trading. The company paid $740,000 in direct legal and other costs and $270,000 in indirect costs.

What was the flotation cost as a percentage of funds raised? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Flotation cost             %

Homework Answers

Answer #1


Flotation cost = ((Initial offering price - Price received by company) x total number of shares + (Direct legal charges + Indirect costs))/ (Initial offering price x Total number of shares)

Flotation cost = ((19.1-15.7)*10000000+(740000+240000))/(19.1*10000000)

Flotation cost = 18.31%

Flotation cost = ((Initial offering price - Price received by company) x total number of shares + (Direct legal charges + Indirect costs))/ (Initial offering price x Total number of shares)

Flotation cost = ((19.1-15.7)*10000000+(740000+240000))/(19.1*10000000)

Flotation cost = 18.31%

Know the answer?
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
Similar Questions
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 $21.65 for each of the 6.65 million shares sold. The initial offering price was $23.50 per share, and the stock rose to $30.01 per share in the first few minutes of trading. The company paid $915,000 in legal and other direct costs and $190,000 in indirect costs. What was the flotation cost as a percentage of funds raised?
The Raven Co. has just gone public. Under a firm commitment agreement, Raven received 20.00 for...
The Raven Co. has just gone public. Under a firm commitment agreement, Raven received 20.00 for each of the 6 million shares sold. The initial offering price was $21.20 per share, and the stock rose to $26.29 per share in the first few minutes of trading. Raven paid $1,320,000 in direct legal and other costs, and $462,000 in indirect costs. What was the flotation cost as a percentage of funds raised? Multiple Choice 33.43% 26.22% 7.60% 34.77% 32.09%
The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, Wiley Oakley received...
The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, Wiley Oakley received $21.15 for each of the 6.60 million shares sold. The initial offering price was $23.00 per share, and the stock rose to $29.51 per share in the first few minutes of trading. Wiley Oakley paid $910,000 in legal and other direct costs and $185,000 in indirect costs. (Enter your answer as directed, but do not round intermediate calculations.) Required: What was the flotation cost...
Under a firm commitment agreement, Zeke, Co. went public and received $35.25 for each of the...
Under a firm commitment agreement, Zeke, Co. went public and received $35.25 for each of the 8.9 million shares sold. The initial offer price was $38 and the stock rose to $41.38. The company paid $560,000 in direct flotation costs and $215,000 in indirect costs. What was the flotation cost as a percentage of funds raised? Multiple Choice 8.00% 23.60% 27.63% 29.14% 17.68%
Under a firm commitment agreement, Zeke, Co. went public and received $31.00 for each of the...
Under a firm commitment agreement, Zeke, Co. went public and received $31.00 for each of the 7.2 million shares sold. The initial offer price was $33 and the stock rose to $35.86. The company paid $560,000 in direct flotation costs and $215,000 in indirect costs. What was the flotation cost as a percentage of funds raised? a-6.73% b-24.43% c-25.78% d-16.08% e-21.11%
Mayo Corp. has just completed an initial public offering. The firm sold three million shares at...
Mayo Corp. has just completed an initial public offering. The firm sold three million shares at an offer price of $8 per share. The underwriting spread was $.50 a share. The price of the stock closed at $11 per share at the end of the first day of trading. The firm incurred $100,000 in legal, administrative, and other costs. What were flotation costs as a fraction of funds raised? PLEASE SHOW ALL CALCULATIONS
Global Traders is offering 130,000 shares of stock to the public in a general cash offer....
Global Traders is offering 130,000 shares of stock to the public in a general cash offer. The offer price is $38 a share and the underwriter's spread is 8 percent. The administrative costs are estimated at $865,000. How much will Global Traders receive from this stock offering as net proceeds assuming the issue is completely sold? $3,370,800 $3,679,800 $4,490,000 $4,075,000 $3,828,400 Deep Hollow Oil issued 135,000 shares of stock last week. The underwriters charged a spread of 8.05 percent in...
ew Horizons S.A. did its initial public offering (IPO) in 2019. In the offering, the company...
ew Horizons S.A. did its initial public offering (IPO) in 2019. In the offering, the company sold 3.5 million shares with the help of an underwriter bank. The underwriter bank bought the shares from the company for 20 euro, and then sold them to the market for 23 euro per share. A few hours into trading, the share price rose to 35 euros per share. Determine the underpricing cost of the transaction.
Zimba Technology Corp. recently went public with an initial public offering of 1.9 million shares of...
Zimba Technology Corp. recently went public with an initial public offering of 1.9 million shares of stock. The underwriter used a firm commitment offering in which the net proceeds were $7.60 per share and the underwriter’s spread was 5 percent of the gross proceeds. Zimba also paid legal and other administrative costs of $264,000 for the IPO. Calculate the gross proceeds per share. (Round your answer to 2 decimal places.)   Gross proceeds $  per share   Calculate the total funds received by...
Zimba Technology Corp. recently went public with an initial public offering of 1.9 million shares of...
Zimba Technology Corp. recently went public with an initial public offering of 1.9 million shares of stock. The underwriter used a firm commitment offering in which the net proceeds were $7.60 per share and the underwriter’s spread was 5 percent of the gross proceeds. Zimba also paid legal and other administrative costs of $264,000 for the IPO. Calculate the gross proceeds per share. (Round your answer to 2 decimal places.)   Gross proceeds $ per share   Calculate the total funds received...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT