P$14-19$ Calculating Flotation Costs $[$LO$4]$

Cully Company needs to raise $$23$ 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 $65$ percent common stock, $8$

percent preferred stock, and $27$ percent debt. Flotation costs for issuing new common

stock are $13$ percent, for new preferred stock, $6$ percent, and for new debt, $5$ percent.

What is the true initial cost figure Southern should use when evaluating its project?