Moonscape has just completed an initial public offering. The firm sold 3 million shares at an offer price of $10 per share. The underwriting spread was $0.50 a share. The price of the stock closed at $15.00 per share at the end of the first day of trading. The firm incurred $300,000 in legal, administrative, and other costs. What were flotation costs as a fraction of funds raised

Moonscape

The flotation costs as a fraction of funds raised is:

= 0.04

Explanation:

a) Data and Calculations:

Number of shares issued = 3,000,000 shares

Offer price per share = $10

Underwriting spread  per share = $0.50

Closing price at first day of trading = $15.00

Legal, administrative, and other costs = $300,000

Amount of funds raised from the issue = $45,000,000 (3,000,000 * $15)

Underwriting cost = $1,500,000 ($0.50 * 3,000,000)

Total flotation cost = $1,800,000 ($300,000 + $1,500,000)

Flotation costs as a fraction of funds raised = $1,500,000/$45,000,000

= 0.04

= 4%

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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