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Donovan Inc. has a debt-equity ratio of 0.5. The company is considering a new plant that will cost $50 million to build. When the company
Donovan Inc. has a debt-equity ratio of 0.5. The company is considering a new plant that will cost $50 million to build. When the company issues new equity, it incurs a flotation cost of 5%. The flotation cost of new debt is 3%. What is the initial cost of the plant if the company raises all capital externally? What if it typically uses 40% of retained earnings? You must show the steps
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