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What was the flotation cost as a percentage of the funds raised

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High Mountain Gear issued 240,000 shares of stock last week. The underwriters charged a 7.85 percent spread in exchange for agreeing to a firm commitment. The legal and accounting fees were $385,000. The company incurred $98,000 in indirect costs related to management time and other internal expenses. The offer price was $21 a share. Within the first hour of trading, the stock was selling for $23.20 a share. What was the flotation cost as a percentage of the funds raised?

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The expert examines what the flotation costs as a percentage of the funds raised are determined.

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ANSWERS

Total flotation costs = $285,000 + $98,000 + $21*7.85%*240,000 = ...

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