Answer:
The flotation cost as a percentage of funds raised is 39.47%
Explanation:
In order to calcuate the flotation cost as a percentage of funds raised we would have to make first the following calculations:
Net amount raised = (15,000,000 shares)($18.40) – $520,000 – $160,000 = $275,320,000
Total direct costs = $520,000 + ($20.00 – $18.40)(15,000,000 shares) = $24,520,000
Total indirect costs = $160,000 + ($25.60 – $20.00)(15,000,000 shares) = $84,160,000
Total costs = $24,520,000 + $84,160,000 = $108,680,000
Therefore, Flotation cost percentage = $108,680,000 / $275,320,000 = 0.3947 or 39.47%
