Flotation Costs Trower has a debtequity ratio of 1.20. The company is considering a new plant that

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Flotation Costs Trower has a debt–equity ratio of 1.20.

The company is considering a new plant that will cost

€145 million to build. When the company issues new equity, it incurs a flotation cost of 8 per cent. The flotation cost on new debt is 3.5 per cent. What is the initial cost of the plant if the company raises all equity externally? What if it typically uses 60 per cent retained earnings? What if all equity investment is financed through retained earnings?

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