Question
Suppose your company needs $24 million to build a new assembly line. Your target debt- equity ratio is 0.8. The flotation cost for new equity
Suppose your company needs $24 million to build a new assembly line. Your target debt-
equity ratio is 0.8. The flotation cost for new equity is 7 percent, but the flotation cost for debt is
only 3 percent. If their internally generated cash flow is sufficient to cover 30 percent of the
equity portion, what is the weighted average flotation cost?
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Fundamental Accounting Principles
Authors: Larson Kermit, Tilly Jensen
Volume I, 14th Canadian Edition
978-0071051507
