Calculating Flotation Costs Southern Alliance needs to raise €45 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 65 per cent equity, 5 per cent preference shares, and 30 per cent debt. Flotation costs for issuing new equity are 9 per cent, for new preference shares, 6 per cent, and for new debt, 3 per cent.

What is the true initial cost figure Southern should use when evaluating its project?