(Calculating flotation costs) (Related to Checkpoint 14.4 on page 502) The Faraway Moving Company is involved in...

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(Calculating flotation costs) (Related to Checkpoint 14.4 on page 502) The Faraway Moving Company is involved in a major plant expansion that requires the expenditure of $200 million in the coming year. The firm plans on financing the expansion by retaining $150 million in firm earnings and borrowing the remaining $50 million.

In return for helping sell the $50 million in new debt, the firm’s investment banker charges a fee of 200 basis points (where one basis point is .01 percent). If Faraway decides to adjust for these flotation costs by adding them to the initial outlay, what will the initial outlay for the project be?

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Financial Management Principles And Applications

ISBN: 9781292222189

13th Global Edition

Authors: Sheridan Titman, Arthur Keown, John Martin

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