3. 19.

Calculating flotation costs [LO 14.4] Walbundrie Wool Company needs to raise $80 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 70 per cent ordinary shares, 5 per cent preference shares and 25 per cent debt. Flotation costs for issuing new ordinary shares are 7 per cent, for new preference shares, 4 per cent, and for new debt, 2 per cent. What is the true initial cost figure the company should use when evaluating its project?