Debt Issue = $ 19 million, Flotation Cost = Fee charged by the bank for making all arrangements of the issue = 2.3% of Issue Value,
Flotation Cost = 19 x 0.023 = $ 437000
Total Planned Investment = $ 37 million,
Therefore, Initial Outlay = Planned Investment + Flotation Cost incurred in debt issue = 37000000 + 437000 = $ 37437000
(Flotation costs) Two-Foot Tools, Inc. sells and distributes work footwear and other clothing for people who...
(Flotation costs) Two-Foot Tools, Inc. sells and distributes work footwear and other clothing for people who work under extreme cold conditions such as in the Arctic or Antartica. The company recently borrowed $19 million from a consortium of banks and agreed to pay 9.9 percent interest before considering taxes of 30 percent The banks also charged the firm a fee of 2.3 percent of the issue to make all the arrangements. The firm plans to invest a total of $37...
(Flotation costs) Two-Foot Tools, Inc. sells and distributes work footwear and other clothing for people who work under extreme cold conditions such as in the Arctic or Antartica. The company recently borrowed $16 million from a consortium of banks and agreed to pay 9.1 percent interest before considering taxes of 30 percent. The banks also charged the firm a fee of 3.2 percent of the issue to make all the arrangements. The firm plans to invest a total of $28...
Flotation costs) Two-Foot Tools, Inc. sells and distributes work footwear and other clothing for people who work under extreme cold conditions such as in the Arctic or Antartica. The company recently borrowed $20 million from a consortium of banks and agreed to pay 9.2 percent interest before considering taxes of 34 percent. The banks also charged the firm a fee of 2.4 percent of the issue to make all the arrangements. The firm plans to invest a total of $37...
(Related to Checkpoint 14.4) (Flotation costs and NPV analysis) The Faraway Moving Company is involved in a major plant expansion that involves the expenditure of $222 million in the coming year. The firm plans on financing the expansion through the retention of $133 million in firm earnings and by borrowing the remaining $89 million. In return for helping sell the $89 million in new debt, the firm's investment banker charges a fee of 200 basis points (where one basis point...