Kurt's Campers issued 60,000 shares of stock last week,received $31.54 a share,and incurred direct costs of $328,000.The offer price was $34 a share.Within the first hour of trading,the stock price increased to $36 a share.What was the flotation cost as a percentage of the funds raised?

Question

Quizplus · Accepted Answer

Total costs = $328,000 + [($36 - $34)× 60,000] + [($34 - $31.54)× 60,000] = $595,600
Amount raised = ($31.54 × 60,000)- $328,000 = $1,564,400
Flotation cost percentage = $595,600 / $1,564,400 = 0.3807,or 38.07%

Kurt's Campers Issued 60,000 Shares of Stock Last Week,received $31