Problem:
The Rouge Co. has just gone public. Under a firm commitment agreement, Rouge received $19.00 for each of the 25 million shares sold. The initial offering price was $21.70 per share, and the stock rose to $22.70 per share in the first few minutes of trading. Rouge paid $880,000 in direct legal and other costs and $340,000 in indirect costs.
Required:
Question: What was the flotation cost as a percentage of funds raised?
Note: Please show the work not just the answer.