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ALC wants to finance its expansion into new markets and has decided to sell 124,650 new...

ALC wants to finance its expansion into new markets and has decided to sell 124,650 new shares of equity. The offer price will be $21 per share, the accounting and legal fees are expected to be $537,911, and the company's underwriters will charge a spread of 7.6 percent. How much will ALC received in net proceeds?

High Mountain Gear issued 200,000 shares of stock last week. The underwriters charged a spread of 3.7 percent in exchange for agreeing to a firm commitment. The legal and accounting fees were $233,941. The company incurred $30,543 in indirect costs. The offer price was $16 a share. Within the day of of trading, the stock was selling for $20 a share. What was the flotation cost?

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Expert Solution

Ans 1) Calculation of net proceeds received by ALC

=Proceeds received by offer-Floatation cost

floatation cost =Legal charges +Underwriters charge

=537911+(124650*21)*7.6%

=537911+198941

=736852

proceeds from offer=124650*21=2617650

Net proceeds= 2617650-736852=1880798

Ans 2)Floatation cost =Legal charges +underwriters charge

=233941+(200000*15)*3.7%

233941+111000=344941

jeff jeffy answered 2 years ago
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