Question: Problem #2 (9 Marks) You are a new intern at CycleNOW Inc., and the company is considering expending into Quebec. The expansion is estimated to

Problem #2 (9 Marks) You are a new intern at CycleNOW

Problem #2 (9 Marks) You are a new intern at CycleNOW Inc., and the company is considering expending into Quebec. The expansion is estimated to cost $12,000,000 for a new production facility. You have gathered the following information for the company: - The firm has a target (optimal) D/E ratio =1.4 - The firm does not have enough internally funds to finance the equity portion of this project. - Flotation costs are expected to be as follows: new debt=5.5\% and new common shares =7.7%. - Assume flotation costs are expensed at time =0. - Tax rate =40% What is the total initial investment for this project

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