The Raven Co. has just gone public. Under a firm commitment agreement, Raven rec

Question

The Raven Co. has just gone public. Under a firm commitment agreement, Raven received $18.60 for each of the 30 million shares sold. The initial offering price was $19.40 per share, and the stock rose to $22.40 per share in the first few minutes of trading. Raven paid $640,000 in direct legal and other costs and $220,000 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 $18.60 for each of the 30 million shares sold. The initial offering price was $19.40 per share, and the stock rose to $22.40 per share in the first few minutes of trading. Raven paid $640,000 in direct legal and other costs and $220,000 in indirect costs.

Explanation / Answer

We need to calculate the net amount raised and the costs associated with the offer. The net amount raised is the number of shares offered times the price received by the company, minus the costs associated with the offer, so:

Net amount raised = (3,000,000 shares)($18.60)

We need to calculate the net amount raised and the costs associated with the offer. The net amount raised is the number of shares offered times the price received by the company, minus the costs associated with the offer, so:

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