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Suppose your company needs $20 million to build a new assembly line. Your target debtequity ratio is .75. The flotation cost for new equity is

Suppose your company needs $20 million to build a new assembly line. Your target debtequity ratio is .75. The flotation cost for new equity is 7 percent, but the flotation cost for debt is only 3 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.

b.

What is your companys weighted average flotation cost, assuming all equity is raised externally? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Flotation cost %

c.

What is the true cost of building the new assembly line after taking flotation costs into account? (Do not round intermediate calculations. Enter your answer in whole dollars, not millions of dollars, i.e. 1,234,567.)

Amount raised $

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