Percentage of Flotation cost =Weight of Equity*Flotation
cost+Weight of Preferred Stock*Flotation cost+Weight of
Debt*Flotation cost =55%*12%+12%*8%+33%*3% =8.55%
True initial investment =25,000,000*(1+8.55%) =27137500
Option b is correct option.
Thinking Hat would like to start a new project which will require $25 million in the...
Thinking Hat would like to start a new project which will require $27 million in the initial cost. The company is planning to raise this amount of money by selling new corporate bonds. It will generate no internal equity for the foreseeable future. Thinking Hat has a target capital structure of 60 percent common stock, 12 percent preferred stock, and 28 percent debt. Flotation costs for issuing new common stock are 9 percent, for new preferred stock, 9 percent, and...
Thinking Hat would like to start a new project which will require $23 million in the initial cost. The company is planning to raise this amount of money by selling new corporate bonds. It will generate no internal equity for the foreseeable future. Thinking Hat has a target capital structure of 55 percent common stock, 10 percent preferred stock, and 35 percent debt. Flotation costs for issuing new common stock are 14 percent, for new preferred stock, 8 percent, and...
Thinking Hat would like to start a new project which will require $23 million in the initial cost. The company is planning to raise this amount of money by selling new corporate bonds. It will generate no internal equity for the foreseeable future. Thinking Hat has a target capital structure of 70 percent common stock, 11 percent preferred stock, and 19 percent debt. Flotation costs for issuing new common stock are 13 percent, for new preferred stock, 8 percent, and...
Thinking Hat would like to start a new project which will require $27 million in the initial cost. The company is planning to raise this amount of money by selling new corporate bonds. It will generate no internal equity for the foreseeable future. Thinking Hat has a target capital structure of 60 percent common stock, 12 percent preferred stock, and 28 percent debt. Flotation costs for issuing new common stock are 9 percent, for new preferred stock, 9 percent, and...
Thinking Hat would like to start a new project which will require $23 million in the initial cost. The company is planning to raise this amount of money by selling new corporate bonds. It will generate no internal equity for the foreseeable future. Thinking Hat has a target capital structure of 65 percent common stock, 11 percent preferred stock, and 24 percent debt. Flotation costs for issuing new common stock are 15 percent, for new preferred stock, 9 percent, and...
Thinking Hat would like to start a new project which will require $28 million in the initial cost. The company is planning to raise this amount of money by selling new corporate bonds. It will generate no internal equity for the foreseeable future. Thinking Hat has a target capital structure of 65 percent common stock, 8 percent preferred stock, and 27 percent debt. Flotation costs for issuing new common stock are 10 percent, for new preferred stock, 5 percent, and...
Cully Company needs to raise $23 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 55 percent common stock, 10 percent preferred stock, and 35 percent debt. Flotation costs for issuing new common stock are 11 percent, for new preferred stock, 7 percent, and for new debt, 2 percent. What is the true initial cost...
Cully Company needs to raise $55 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 55 percent common stock, 15 percent preferred stock, and 30 percent debt. Flotation costs for issuing new common stock are 7 percent, for new preferred stock, 4 percent, and for new debt, 2 percent. What is the true initial cost...
Cully Company needs to raise $55 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 55 percent common stock, 15 percent preferred stock, and 30 percent debt. Flotation costs for issuing new common stock are 7 percent, for new preferred stock, 4 percent, and for new debt, 2 percent. What is the true initial cost...
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