Calculate all flotation (issue) costs of IPO for Mutt.Com
Subject: Business / Finance
Question
1. Calculate all flotation (issue) costs of IPO for Mutt.Com
2. Calculate the two ratios (Direct Cost Ratio: Direct Costs/Funds Raised) and
(Indirect Cost Ratio: Underpricing Costs/Funds Raised). Compare these two ratios
to the numbers in Figure 15.3 and Figure 15.5 in Chapter 15.
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3. Calculate another ratio known as total flotation cost ratio (Total flotation
costs/Value of Shares issued). Please note that the value of shares issued is based
on the non-underpriced value of the issue. Do you think that issuing equity is a
cheap process? Use your answer to justify your opinion.
4. Answer the following questions in the MiniCase focusing on whether
underpricing should be considered as a part of total flotation cost:
a. Would Mutt.Com prefer a low stock price?
b. Would that make the issue less costly?
