gas-turbine plant, which runs on gas- ified coal, wood, or agricultural wastes, will cost Edi- son...

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gas-turbine plant, which runs on gas- ified coal, wood, or agricultural wastes, will cost Edi- son $65 million. Edison wants to raise the capital from three financing sources: 45% common stock, 10% ferred stock (which carries a 6% cash dividend when declared), and 45% borrowed funds. Edison's invest- ment banks quote the following flotation costs: Financing Source pre- f 0 1 V i t S Flotation Costs Selling Par Price Value Common stock 4.6% $32/share $10 Preferred stock 8.1 55/share 15 Bond 1.4 980 1,000 (a) What are the total flotation costs to raise $65 million? (b) How many shares (both common and preferred) or bonds must be sold to raise $65 million? (c) If Edison makes annual cash dividends of $2 per common share and annual bond interest pay- ments are at the rate of 12%, how much cash should Edison have available to meet both the equity and debt obligation? (Note that whenever a firm declares cash dividends to its common stockholders, the preferred stockholders are entitled to receive dividends of 6% of par value.) gas-turbine plant, which runs on gas- ified coal, wood, or agricultural wastes, will cost Edi- son $65 million. Edison wants to raise the capital from three financing sources: 45% common stock, 10% ferred stock (which carries a 6% cash dividend when declared), and 45% borrowed funds. Edison's invest- ment banks quote the following flotation costs: Financing Source pre- f 0 1 V i t S Flotation Costs Selling Par Price Value Common stock 4.6% $32/share $10 Preferred stock 8.1 55/share 15 Bond 1.4 980 1,000 (a) What are the total flotation costs to raise $65 million? (b) How many shares (both common and preferred) or bonds must be sold to raise $65 million? (c) If Edison makes annual cash dividends of $2 per common share and annual bond interest pay- ments are at the rate of 12%, how much cash should Edison have available to meet both the equity and debt obligation? (Note that whenever a firm declares cash dividends to its common stockholders, the preferred stockholders are entitled to receive dividends of 6% of par value.)