Check my work Moonscape has just completed an initial public offering. The firm

Question

Check my work Moonscape has just completed an initial public offering. The firm sold 5 million shares at an offer price of $8 per share. The underwriting spread was $0.30 a share. The price of the stock closed at $12.00 per share at the end of the first day of trading. The firm incurred $500,000 in legal, administrative, and other costs. What were flotation costs as a fraction of funds raised? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Costs as percent of funds raised

Explanation / Answer

Underwriting cost for moonscape

Underwriting spread ( $0.30 × 5 million) . 1.5 million

Under pricing ( $4 × 5 million ) 20.0 million

Other direct costs . 0.5 million

Total . 22 million

Funds raised = $8 × 5 million. = 40 million

Floatation cost / Fund raised = 22 / 40 = 55%

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---