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Problem 1 3 - 1 4 Calculating Flotation Costs Suppose your company needs $ 1 0 million to build a new assembly line. Your target
Problem Calculating Flotation Costs Suppose your company needs $ million to build a new assembly line. Your target debt equity ratio is The flotation cost for new equity is percent, but the flotation cost for debt is only percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small. a What is your company's weighted average flotation cost, assuming all equity is raised externally? Do not round Intermedlote colculetlons ond enter your onswer os o percent rounded to declmal pleces, eg b What is the true cost of building the new assembly line after taking flotation costs into account? Do not round intermedlote celculetions and enter your enswer In dollers, not millons of dollors, rounded to the neerest whole number, eg A Answer is complete but not entirely correct.
Problem Calculating Flotation Costs
Suppose your company needs $ million to build a new assembly line. Your target debt
equity ratio is The flotation cost for new equity is percent, but the flotation cost for
debt is only percent. Your boss has decided to fund the project by borrowing money
because the flotation costs are lower and the needed funds are relatively small.
a What is your company's weighted average flotation cost, assuming all equity is raised
externally? Do not round Intermedlote colculetlons ond enter your onswer os o
percent rounded to declmal pleces, eg
b What is the true cost of building the new assembly line after taking flotation costs into
account? Do not round intermedlote celculetions and enter your enswer In dollers,
not millons of dollors, rounded to the neerest whole number, eg
A Answer is complete but not entirely correct.
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