Calculating Flotation Costs the Huff Co, has just gone public. Under a firm commitment agreement, Huff received
Question:
Calculating Flotation Costs the Huff Co, has just gone public. Under a firm commitment agreement, Huff received $15.05 for each of the 5 million shares sold. The initial offering price was $26 per share, and the stock rose to $19.50 per share in the first few minutes of trading. Huff paid $800,000 in direct legal and other costs, and $250,000 in indirect costs, what was the flotation cost as a percentage of funds raised?
Step by Step Answer:
We need to calculate the net amount raised and the costs associated with the offer The net amount ra...View the full answer
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th Edition
Authors: Stephen A. Ross, Randolph W. Westerfield, Bradford D.Jordan
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Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
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