Answer:
46.79%
Explanation:
Net amount raised = Sale Proceeds - Direct Legal Costs - Indirect Costs
Net amount raised = ($18.50 x $20,000,000) - $580,000 - $190,000
Net amount raised = $370,000,000 - $770,000
Net amount raised = $369,230,000
Share offered at price = $22.80 per share
Amount received per share = $18.50
Underwriting spread = $22.80 - $18.50 = $4.30 per share
Total underwriting spread = Underwriting spread x no. of shares offered
Total underwriting spread = $4.30 x 20,000,000
Total underwriting spread = $86,000,000
Direct cost = Total underwriting spread + Direct Legal Costs
Direct cost = $86,000,000 + $580,000
Direct cost = $86,580,000
Indirect cost = Indirect cost + Total underwriting spread
Indirect cost = $190,000 + ($22.80 - $18.50) x $20,000,000
Indirect cost = $190,000 + $86,000,000
Indirect cost = $86,190,000
Total Debt Capital = Direct Cost + Indirect Cost
Total Debt Capital = $86,580,000 + $86,190,000
Total Debt Capital = $172,770,000
Flotation cost % = Total Debt Capital / Equity Capital raised
Flotation cost % = $172,770,000 / $369,230,000 x 100
Flotation cost % = 46.79%
