Question
Southern Alliance Company needs to raise $29 million to start a new project and will raise the money by selling new bonds. The company will
Southern Alliance Company needs to raise $29 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 55 percent common stock, 12 percent preferred stock, and 33 percent debt. Flotation costs for issuing new common stock are 9 percent, for new preferred stock, 10 percent, and for new debt, 2 percent. What is the true initial cost figure Southern should use when evaluating its project?
a) 30974900 b) 32363988 c) 29874450 d) 31119219 e) 26970000
A is wrong
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