Asked by
Tyler Barbre
on Dec 09, 2024
Verified
You are considering a project which requires $136,000 in external financing. The flotation cost of equity is 11 % and the cost of debt is 4.5 %. You wish to maintain a debt-equity ratio of.45. What is the initial cost of the project including the flotation costs?
A) $138,009
B) $143,367
C) $149,422
D) $154,004
E) $155,283
Flotation Cost
Flotation cost refers to the total expenses incurred by a company in issuing new securities, including underwriting, legal, registration, and other associated fees.
Debt-Equity Ratio
An indicator of a corporation's use of debt financing, determined by dividing its overall debts by the equity of its shareholders.
External Financing
Funds a business obtains from outside the company, including loans, equity investments, and other financial instruments.
- Understand the impact of flotation costs on project financing and the calculation of initial project costs including flotation costs.
Verified Answer
NS
Learning Objectives
- Understand the impact of flotation costs on project financing and the calculation of initial project costs including flotation costs.