Calculating Flotation Costs.
Response to the following problem:
Swan Songs Ltd has just gone public. Under a firm-commitment agreement, Swan Songs received $19 for each of the 6.5 million shares sold. The initial offering price was $21.25 per share, and the share price rose to $26.45 in the first few minutes of trading.
Swan Songs paid $900 000 in legal and other direct costs, and $175 000 in indirect costs. What was the flotation cost as a percentage of funds raised?