Question: Your firm is considering a project which requires an initial investment of $5 million. Your target D/E ratio is 0.67. Flotation costs for equity are

Your firm is considering a project which requires an initial investment of $5 million. Your target D/E ratio is 0.67. Flotation costs for equity are 8% and flotation costs for debt are 2%. What is the true cost (in dollars) of the project when you consider flotation costs?

Multiple Choice

$5.57 million
$5.61 million
$5.24 million
$5.30 million
$5.00 million

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