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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 $20.65 for each of the 6.55 million shares sold. The initial offering price was $22.50 per share, and the stock rose to $29.01 per share in the first few minutes of trading. The company paid $905,000 in legal and other direct costs and $180,000 in indirect costs. What was the flotation cost as a percentage of funds raised? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 


Flotation cost percentage _______ %

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Net amount raised = (6,550,000 shares)($20.65) – $905,000 – $180,000 = $134,172,500

Total direct costs = $905,000 + ($22.50 – $20.65)(6,550,000 shares) = $13,022,500

Total indirect costs = $180,000 + ($29.01 – $22.50)(6,550,000 shares) = $42,820,500

Total costs = $13,022,500 + $42,820,500 = $55,843,000

Flotation cost percentage = $55,843,000 / $134,172,500 = 0.4162 or 41.62%

> This is the correct way to find the answer!

Justice7 Fri, Dec 3, 2021 8:37 AM

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