Suppose your company needs $$17$ million to build a new assembly line. Your target debt$-$equity ratio is $\mathrm{.}75.$ The flotation cost for new equity is $10$ percent, but the flotation cost for debt is only $7$ 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 intermediate calculations and enter your answer as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

b$.$ What is the true cost of building the new assembly line after taking flotation costs into account? $($Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number, e$.$g$.,1,234,567.)$Problem $14-18$ Calculating Flotation Costs $[$LO$4]$

Suppose your company needs $$17$ million to build a new assembly line. Your target debt$-$

equity ratio is $\mathrm{.}75.$ The flotation cost for new equity is $10$ percent, but the flotation cost for

debt is only $7$ 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 intermediate calculations and enter your answer as a

percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

b$.$ What is the true cost of building the new assembly line after taking flotation costs into

account? $($Do not round intermediate calculations and enter your answer in dollars,

not millions, rounded to the nearest whole number, e$.$g$.,1,234,567.)$