Kurt's Campers issued 54,000 shares of stock last week,received $51.54 a share,and incurred direct costs of $312,000.The offer price was $56 a share.Within the first hour of trading,the stock price increased to $63 a share.What was the flotation cost as a percentage of the funds raised?

Question

Quizplus · Accepted Answer

Total costs = $312,000 + [($63 - 56)× 54,000] + [($56 - 51.54)× 54,000] = $930,840Amount raised = ($51.54 × 54,000)- $312,000 = $2,471,160Flotation cost percentage = $930,840/$2,471,160 = .3767,or 37.67%

Kurt's Campers Issued 54,000 Shares of Stock Last Week,received $51