Your company is evaluating a new factory that will cost $23 million to build. Your target debt-equity ratio is 1.1. The flotation cost for new equity is 8% and the flotation cost for new debt is 3%. The company is planning to use retained earnings for 50% of the equity financing.

Part 1

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

Part 2

What are the flotation costs (in $ million)?