Suppose your company needs $25 million to build a new assembly line. Your target debt to equity
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Question:
- Suppose your company needs $25 million to build a new assembly line. Your target debt to equity ratio is 0.65. The flotation cost for new equity is 7 percent, but the flotation cost for debt is only 3 percent.
a.What is your firm’s weighted average flotation cost, assuming the same debt to equity ratio?
b. What is the true cost of building new assembly line after taking flotation costs into account?
Related Book For
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
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