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Trower Corp. has a debt-equity ratio of .85. The company is considering a new plant that will cost $111 million to build. When the
Trower Corp. has a debt-equity ratio of .85. The company is considering a new plant that will cost $111 million to build. When the company issues new equity, it incurs a flotation cost of 8.1 percent. The flotation cost on new debt is 3.6 percent. a. What is the initial cost of the plant if the company raises all equity externally? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar, e.g., 1,234,567.) b. What is the initial cost of the plant if the company typically uses 65 percent retained earnings? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar, e.g., 1,234,567.) c. What is the initial cost of the plant if the company typically uses 100 percent retained earnings? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar, e.g., 1,234,567.) > Answer is complete but not entirely correct. a. Initial cash outflow $ 120,783,460 b. Initial cash outflow C. Initial cash outflow 14,438,578 111,000,000
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