Breckenridge Corp. has a debt-equity ratio of .65. The company is considering a new plant that will

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Breckenridge Corp. has a debt-equity ratio of .65. The company is considering a new plant that will cost $137 million to build. When the company issues new equity, it incurs a flotation cost of 8 percent. The flotation cost on new debt is 3.5 percent. What is the initial cost of the plant if the company raises all equity externally? What if it typically uses 60 percent retained earnings? What if all equity investments are financed through retained earnings?

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Corporate Finance

ISBN: 978-1259918940

12th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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