Question

Caughlin Company needs to raise $55 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 70 percent common stock, 5 percent preferred stock, and 25 percent debt. Flotation costs for issuing new common stock are 9 percent, for new preferred stock, 6 percent, and for new debt, 3 percent. What is the true initial cost figure the company should use when evaluating its project?




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  • CreatedMarch 13, 2014
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