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Floatation cost problem

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Lewis Morris Crew spends $350,000 in bureaucratic expenses in their IPO. Their underwriter sells 3 million shares at an offer price of $9.69, charging Lewis Crew 50 cents per share in spread. The stock closes at $12. What was the total floatation cost as a fraction of funds raised?

Ans: 32.26%

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Solution Summary

Floatation cost problem is worked.

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Funds Raised = (Offer price-underwriter spread)*Number of shares -Bureaucratic expenses
=(9.69-0.50)*3 million -0.35 million = 27.22 ...

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