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Margarita [4]
3 years ago
15

Deep Hollow Oil issued 135,000 shares of stock last week. The underwriters charged a spread of 8.05 percent in exchange for agre

eing to a firm commitment. The legal and accounting fees amounted to $418,000 and the company incurred $48,000 in indirect costs. The offer price was $33 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?
Business
1 answer:
Neporo4naja [7]3 years ago
6 0

Answer:

The ratio of flotation cost to funds raised is 20.13%

Explanation:

First of all, it is noteworthy that actual amount received per share by Deep Hollow Oil is the issue price minus the underwriting spread of $2.6565 (8.05% of $33),in other words the net issue price is $30.3435

The total amount raised is $ 4,096,372.50 (135000*$30.3435 ),while total flotation costs are as follows:

Underwriting costs                    $ 358,627.50  

Legal and accounting fees       $418,000

Indirect costs                              $48,000

Total flotation costs                   $824,627.50  

However, the flotation costs as a percentage of funds raised is given below:

$824,627.50  /$4,096,372.50=20.13%

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Ming Chen began a professional practice on June 1 and plans to prepare financial statements at the end of each month. During Jun
Leya [2.2K]

Answer:

The accounting equation holds as follows:

Asset = Liabilities + Equity = $80,000

Explanation:

Note: See the attached excel file for the analysis of the Effect of June Transactions on the Accounting Equation

From the last balances in the attached excel file, we have:

Assets = Cash + Receivable + Equipment = $41,000 + $8,000 + $31,000 = $80,000

Liabilities = Payable = $0

Equity = M. Chen, Capital - M. Chen, Withdrawals + Revenue - Expenses = $75,000 - $1,000 + $10,500 - $4,500 = $80,000

Liabilities + Equity = $0 + $80,000 = $80,000

Therefore, the accounting equation holds as follows:

Asset = Liabilities + Equity = $80,000

Download xlsx
4 0
2 years ago
A firm will exit a competitive market when A. costs force the marginal cost curve to shift to the left. B. the longrun profit wo
kakasveta [241]

Answer:

B. the longrun profit would be negative.

Explanation:

A perfect competition is characterized by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply. There are no barriers to entry or exit of firms into the industry.  

In the long run, firms earn zero economic profit.  If in the short run firms are earning economic profit, in the long run firms would enter into the industry. This would drive economic profit to zero.  

Also, if in the short run, firms are earning economic loss, in the long run, firms would exit the industry until economic profit falls to zero.  

A firm would shut down in the short run if price is less than average variable cost and exit if it  is making a loss

4 0
3 years ago
Net sales for the month are $800,000, and bad debts are expected to be 1.5% of net sales. The company uses the percentage-of-sal
Dmitriy789 [7]

Answer:

$27,000

Explanation:

Allowance for doubtful accounts before adjustment       $15,000

Allowance provided for the month;

$800,000*1.5%                                                                     $12,000

Closing balance for Doubtful Accounts                             $27,000

The allowance for doubtful accounts is provided on net sales basis therefore sales are multiplied with %  of bad debt allowance given in question.

4 0
3 years ago
Read 2 more answers
Think of two advertisements that you have seen recently, one that you like and one that you dislike. What is each ad trying to s
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Answer and Explanation:

An advertisement that I have seen frequently and that has caught my attention is an advertisement about Shampoo for dogs. This announcement has a color palette that I like very much, it has a feeling of balance and freshness. This makes me believe that the dog will feel these sensations if he uses this product, which makes me want to buy it immediately. The dog images, used in the ad, also reinforce this desire, since all dogs are well treated and with very beautiful hair.

However, an ad that has not convinced me to buy the product is an advert about face moisturizer. Although the advertisement is well produced, it promises a miraculous product with effects beyond the capacity of a moisturizer. When watching the ad I feel somewhat deceived and I have negative feelings about the product.

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INTERNAL AUDITORS are responsible for verifying accuracy ..........................
The activities performed by the internal auditors help a company to achieve its goals by employing a systematic and disciplined approach to evaluate and improve the effectiveness of risk management, control and governance.<span />
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