The flotation cost for new equity is 7% and the flotation cost for new debt is 4%. The company has a target debt-equity ratio of 1.2.

Attempt 1/10 for 9.5 pts.

Part 1

What are the weighted average flotation costs as a fraction of the amount invested?

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Attempt 1/10 for 9.5 pts.

Part 2

What would be the weighted average flotation costs as a fraction of the amount invested if the company used retained earnings to finance the equity portion of the amount invested?

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