1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
erastova [34]
2 years ago
6

he Raven Co. has just gone public. Under a firm commitment agreement, Raven received $18.60 for each of the 30 million shares so

ld. The initial offering price was $19.40 per share, and the stock rose to $22.40 per share in the first few minutes of trading. Raven paid $640,000 in direct legal and other costs and $220,000 in indirect costs. What was the flotation cost as a percentage of funds raised?
Business
1 answer:
alexandr1967 [171]2 years ago
6 0

Answer:

11.14%

Explanation:

Fund raised is the actual amount raised when the share is offered for sale in the market. Since the price of the shares fluctuated, this can be calculated by getting the average of $19.40 per share which is the initial offering price and $22.40 per share which the stock rose to in the first few minutes of trading and then multiply it by the 30 million shares sold. This calculated as:

Fund raised = [($19.40 + $22.40) ÷ 2] × 30,000,000

                    = $20.90  × 30,000,000

                    = $627,000,000  

Amount received by Raven can be calculated by multiplying the amount received per share of $18.60 by the 30 million shares sold. This is given as follows:

Amount Received by Raven = $18.60 × 30,000,000

                                                = $558,000,000  

Flotation cost is the addition of all expenses a company spent when it offers its securities for sale to the public. These expenses include underwriting fees, registration fees, and legal fees.

From the question, the floating cost is therefore the addition of direct legal and other costs of $640,000 and indirect costs of $220,000 paid by Raven as well as the difference between the amount raised and the amount received by Raven (i.e. $627,000,000 - $558,000,000 = $69,000,000). This floating cost calculation is given as follows:

Floating cost = $640,000 + $220,000 + $69,000,000  

                      = $69,860,000  

The flotation cost as a percentage of funds raised = ($69,860,000 ÷ $627,000,000) × 100

                                                                                    =  0.1114 × 100

                                                                                     = 11.14%

 Therefore, the flotation cost as a percentage of funds raised is 11.14%.

You might be interested in
A large increase in the supply of hd-tv sets occurs simultaneously with a smaller decrease in its demand. as a result the equili
zhenek [66]
The answer to this question is :<span>decrease, increase
When Demand decreases, it indicates that consumer now is less willing to buy that certain products.
This unwillingness will started to drives the price down. During this period, Sellers will start to create more effort to sell the remaining products so they could obtain the highest price possible</span>
7 0
3 years ago
Your client has said that he likes French Provincial furniture. What should you do
kogti [31]
A show him examples of french province and others.
6 0
3 years ago
Read 2 more answers
The managerial accountant at Safety, Inc. prepared a Flexible Budget Performance Report. The managerial accountant noticed a $5,
alexandr1967 [171]

Answer:

The managerial accountant found out that the cost of the units previously sold was higher than the selling price per unit.

If the variance is unfavorable, it means that the total budgeted costs were larger than the total budgeted revenue. In this case the variance was $5,600 unfavorable. We are not told how many units were sold but it is obviously a mistake to sell products at a lower price than COGS. So the previous flexible budget was not properly prepared.

7 0
3 years ago
What happens to the price and the quantity bought and sold in the cocoa market if countries producing cocoa experience a drought
Rashid [163]

Answer: Supply of cocoa will fall; Demand rises; Price increases.

Explanation:

A drought is when there is little or no rainfall in a particular area. When countries that are producing cocoa experience a drought, this will lead to a reduction in the supply of cocoa as there will be lesser cocoa available for farmers to supply.

Then, due to the new study which is released demonstrating the health benefits of cocoa, this will lead to an increase in the demand for cocoa. The demand will rise and since there's increase in demand and reduction in supply, the price will rise.

4 0
3 years ago
Sometimes one observes that the price of a company's stock falls after the announcement of favorable earnings. This phenomenon i
Nina [5.8K]

Sometimes one observes that the price of a company's stock falls after the announcement of favorable earnings. This phenomenon is consistent with the efficient markets hypothesis if the earning were not as high as anticipated

The efficient market hypothesis states that neither technical nor fundamental analysis can generate excess returns because new information in the market is immediately reflected in stock prices.

The efficient market hypothesis is a hypothesis in financial economics that states that asset prices reflect all available information. A direct consequence of this is that it is impossible to "beat" the market consistently on a risk-adjusted basis, as market prices should only respond to new information.

Learn more about efficient markets hypothesis here: brainly.com/question/14311423

#SPJ4

3 0
1 year ago
Other questions:
  • Boston Company purchased equipment by signing a noninterest-bearing note with a face value of $64,800. The list price of the equ
    9·1 answer
  • Ceradyne, Inc. has decided to discontinue manufacturing its Quantum model credit card reader. Currently the company has a number
    5·1 answer
  • A change in income preferences or prices of other goods or services leads to a that causes a:______
    5·1 answer
  • The classical dichotomy and the neutrality of moneyThe classical dichotomy is the separation of real and nominal variables. The
    15·1 answer
  • Valley Farms offers to sell Whole Harvest Bakeries, Inc., five hundred bushels of wheat. Whole Harvest responds, "We agree to bu
    8·1 answer
  • If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 10 percent
    7·1 answer
  • Which of the following is NOT one of the six marketing fundamentals?
    15·1 answer
  • Mike just started working for a company that maintains a defined benefit retirement plan. If Mike terminates his employment with
    8·1 answer
  • Poulter corporation will pay a dividend of $4.75 per share next year. The company pledges to increase its dividend by 7.5 percen
    8·1 answer
  • As Lily files her taxes, she learns that her federal total tax due ends up being $206. According to her Federal income tax withh
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!