High Mountain Gear issued 240,000 shares of stock last week. The underwriters ch

Question

High Mountain Gear issued 240,000 shares of stock last week. The underwriters charged a 7.85% spread in excnahge for agreeing to a firm committment. The legal and accounting fees were $385,000. The company incurred $98,000 in indirect costs related to management time and other internal expenses. The offer price was $21 a share. Within the first hour of trading, the stock was selling for $23.20 a share. What was the flotation cost as a percentage of the funds raised?

A) 21.53 percent

B) 25.29 percent

C) 27.46 percent

D) 33.80 percent

E) 41.22 percent

Explanation / Answer

D IS ANSWER

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