Can someone please give me the correct Flotation cost percentage. Thank You. The

Question

Can someone please give me the correct Flotation cost percentage. Thank You.

The Wiley Oakley Co, has just gone public. Under a firm commitment agreement, Wiley Oakley received $20.35 for each of the 6.52 million shares sold. The initial offering price was $22.20 per share, and the stock rose to $28.71 per share in the first few minutes of trading. Wiley Oakley paid $902,000 in legal and other direct costs and $177,000 in indirect costs. (Enter your answer as directed, but do not round intermediate calculations.) Required: What was the flotation cost as a percentage of funds raised? (Enter your anser as a percentage rounded to 2 decimal places (e.g., 32.16).) Flotation cost percentage

Explanation / Answer

Proceeds from issue to company = 33 x 4200000

= $138,600,000

Total cost to company = Underwriting cost + Legal and direct cost + Indirect costs

= (2.40 x 4200000) + 915000 + 270000

= $11,265,000

Flotation cost = 11265000 / 138600000

= 8.13%

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