Question
In: Finance
Under a firm commitment agreement, Zeke, Co. went public and received $35.25 for each of the...
Under a firm commitment agreement, Zeke, Co. went public and received $35.25 for each of the 8.9 million shares sold. The initial offer price was $38 and the stock rose to $41.38. The company paid $560,000 in direct flotation costs and $215,000 in indirect costs. What was the flotation cost as a percentage of funds raised?
a)27.63
b)8
c)17.68
d)29.14
e)23.6
Solutions
Expert Solution
| Net Amount Raised by Zeke Co. | |||||||||
| = Amount Received - Direct Flotation Cost - Indirect Flotation Cost | |||||||||
| = (No of Shares*Amount Per Share) - Direct Flotation Cost - Indirect Flotation Cost | |||||||||
| = (8,900,000*$35.25) - $560,000 - $215,000 | |||||||||
| = $313,725,000 - $560,000 - $215,000 | |||||||||
| = $312,950,000 | |||||||||
| Total Costs | |||||||||
| = Direct Flotation Cost + Indirect Cost | |||||||||
| + (Rising Stock Price - Amount Received per share)*No of Shares | |||||||||
| = $560000 + $215000 - ($41.38 - $35.25)*8900000 | |||||||||
| = $775000 - $6.13*8900000 | |||||||||
| = $775000 - $54557000 | |||||||||
| = $55,332,000 | |||||||||
| Flotation Cost % | |||||||||
| = Total Cost / Net Amount Raised *100 | |||||||||
| = $55,332,000 / $312,950,000 * 100 | |||||||||
| = 17.68% | |||||||||
| So answer is (c) 17.68% | |||||||||
jeff jeffy answered 2 years agoRelated Solutions
Under a firm commitment agreement, Zeke, Co. went public and received $35.25 for each of the...
Under a firm commitment agreement, Zeke, Co. went public and
received $35.25 for each of the 8.9 million shares sold. The
initial offer price was $38 and the stock rose to $41.38. The
company paid $560,000 in direct flotation costs and $215,000 in
indirect costs. What was the flotation cost as a percentage of
funds raised?
The Collins Co. has just gone public. Under a firm commitment agreement, the company received $33.50...
The Collins Co. has just gone public. Under a firm commitment
agreement, the company received $33.50 for each of the 4.25 million
shares sold. The initial offering price was $35.90 per share, and
the stock rose to $44.00 per share in the first few minutes of
trading. The company paid $920,000 in legal and other direct costs
and $280,000 in indirect costs.
What is the net amount raised? (Do not round intermediate
calculations. Enter your answer in dollars, not...
The Raven Co. has just gone public. Under a firm commitment agreement, Raven received 18.25 for...
The Raven Co. has just gone public. Under a firm commitment
agreement, Raven received 18.25 for each of the 8 million shares
sold. The initial offering price was $19.89 per share, and the
stock rose to $26.06 per share in the first few minutes of trading.
Raven paid $1,360,000 in direct legal and other costs, and $408,000
in indirect costs. What was the flotation cost as a percentage of
funds raised?
The Huff Co. has just gone public. Under a firm commitment agreement, the company received $17.64...
The Huff Co. has just gone public. Under a firm commitment
agreement, the company received $17.64 for each of the 3.2 million
shares sold. The initial offering price was $22.50 per share, and
the stock rose to $24.15 per share in the first day of trading. The
company paid $984,900 in direct legal and other costs and incurred
$340,000 in indirect costs. What was the flotation cost as a
percentage of the net amount raised?
A- 38.56%
B-40.32%
C-41.68%
D-40.20%
The Raven Co. has just gone public. Under a firm commitment agreement, Raven received $17.40 for...
The Raven Co. has just gone public. Under a firm commitment
agreement, Raven received $17.40 for each of the 20 million shares
sold. The initial offering price was $19.50 per share, and the
stock rose to $21.60 per share in the first few minutes of trading.
Raven paid $600,000 in direct legal and other costs and $200,000 in
indirect costs.
What was the flotation cost as a percentage of funds raised?
(Do not round intermediate calculations and enter your
answer...
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 $20.95 for each of the
6.58 million shares sold. The initial offering price was $22.80 per
share, and the stock rose to $29.31 per share in the first few
minutes of trading. The company paid $908,000 in legal and other
direct costs and $183,000 in indirect costs.
What is the net amount raised? (Do not round intermediate
calculations. Enter your answer in dollars,...
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 $21.05 for each of the
6.59 million shares sold. The initial offering price was $22.90 per
share, and the stock rose to $29.41 per share in the first few
minutes of trading. The company paid $909,000 in legal and other
direct costs and $184,000 in indirect costs.
What is the net amount raised? (Do not round intermediate
calculations. Enter your answer in dollars,...
The Rabe Company has just gone public under a firm commitment agreement and sold (i.e. floated)...
The Rabe Company has just gone public under a firm commitment
agreement and sold (i.e. floated) 4.1 million shares to the public.
Rabe stock went public (i.e. begin to trade over the exchange) at
$34.40. The first day closing price of Rabe stock was $41 per
share. Rabe paid $905,000 in legal and other direct costs, $250,000
in indirect costs, and an underwriter’s fee of $2.40 per share.
Required:
i. Compute
the net amount raised by the Boeing Company as a...
Rust Pipe Co. was established in 1994. Four years later the company went public. At that...
Rust Pipe Co. was established in 1994. Four years later the
company went public. At that time, Robert Rust, the original owner,
decided to establish two classes of stock. The first represents
Class A founders' stock and is entitled to twelve votes per share.
The normally traded common stock, designated as Class B, is
entitled to one vote per share. In late 2010, Mr. Stone, an
investor, was considering purchasing shares in Rust Pipe Co. While
he knew the existence...
Rust Pipe Co. was established in 1994. Four years later the company went public. At that...
Rust Pipe Co. was established in 1994. Four years later the
company went public. At that time, Robert Rust, the original owner,
decided to establish two classes of stock. The first represents
Class A founders' stock and is entitled to twelve votes per share.
The normally traded common stock, designated as Class B, is
entitled to one vote per share. In late 2010, Mr. Stone, an
investor, was considering purchasing shares in Rust Pipe Co. While
he knew the existence...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Write a Java Program using the following instruction: Create the following 3 methods that calculate and...
- How would the S/D curves shift if a $3 tax was imposed on suppliers for each...
- Why should a time-based authentication system invalidate the current password on a successful authentication?
- Explain the difference between a market penetration strategy and a market development strategy.
- QUESTION 4 Discuss the sanctity of life versus the quality of life debate as presented by...
- 0.560 g He, 20.482 g F2, and 13.960 g Ar are placed in a 18.4-L container...
- Let X ∼ Pois(4), Y ∼ Pois(12), U ∼ Pois(3) be independent random variables. a) What...
ADVERTISEMENT