Question
ABC Corporation is levered. This means its capital structure consists of both debt and equity. It would like to keept its debt-to-equity ratio unchanged when
ABC Corporation is levered. This means its capital structure consists of both debt and equity. It would like to keept its debt-to-equity ratio unchanged when it needs to raise additional money for its future projects. ABC Corporation's target capital structure is: 55 % common stock, 10 % preferred stock, and 35 % debt. ABC Corporation has an opportunity to start a potentially very profitable new project, for which it would need to raise $65 million. It will raise these funds by issuing new bonds and stocks. Flotation costs associated with issuing new common stock shares, preferred stock shares, and bonds are 11 percent, 8 percent, and 4 percent, respectively. What is the "true" initial cost of ABC Corporation's new project
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