Problem $13-14$ Calculating Flotation Costs

Suppose your company needs $$10$ million to build a new assembly line. Your target debt$-$

equity ratio is $\mathrm{.}4.$ The flotation cost for new equity is $10$ percent, but the flotation cost for

debt is only $7$ percent. Your boss has decided to fund the project by borrowing money

because the flotation costs are lower and the needed funds are relatively small.

a$.$ What is your company's weighted average flotation cost, assuming all equity is raised

externally? $($Do not round Intermedlote colculetlons ond enter your onswer os o

percent rounded to $2$ declmal pleces, e$.$g$.,32\mathrm{.}16.)$

b$.$ What is the true cost of building the new assembly line after taking flotation costs into

account? $($Do not round intermedlote celculetions and enter your enswer In dollers,

not millons of dollors, rounded to the neerest whole number, e$.$g$.,1,234,567.)$

A Answer is complete but not entirely correct.