The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, Wi

Question

The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, Wiley Oakley received $22.05 for each of the 6.69 million shares sold. The initial offering price was $23.90 per share, and the stock rose to $30.41 per share in the first few minutes of trading. Wiley Oakley paid $919,000 in legal and other direct costs and $194,000 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 answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Flotation cost percentage %

Explanation / Answer

Per share legal, other direct and indirect costs = (919000+194000)/6690000

=0.1663

Flotation cost = (IPO price-price received+ Per share legal, other direct and indirect costs)*100/IPO price

=(23.9-22.05+.1663)*100/23.9 = 8.44%

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