Business, 26.11.2021 17:30 sparksjesse2830

Suppose your company needs $17 million to build a new assembly line. Your target debt-equity ratio is .75. The flotation cost for new equity is 10 percent, but the flotation cost for debt is only 7 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small. a. What is your company's weighted average flotation cost, assuming all equity is raised externally?
b. What is the true cost of building the new assembly line after taking flotation costs into account?

Answers: 2

Show answers

Another question on Business

Business, 21.06.2019 17:50

When borrowers want funding to pay for different projects, they go to the loanable funds market and acquire funds through either indirect finance or direct finance. below, you are given five different scenarios. is each an example of direct finance or indirect finance?

Answers: 2

Answer

Business, 21.06.2019 18:30

Why should organizations be allowed to promote offensive, violent, sexual, or unhealthy products that can be legally sold and purchased?

Answers: 3

Answer

Business, 21.06.2019 19:20

You wish to buy a cabin in 15 years. today, the cabin costs $150,000. you believe the price of the cabin will inflate at 4% annually. you want to invest a single amount of money (lump sum) today and have the money grow to equal the future purchase price of the cabin 15 years from now. if you can earn 10% annually on your investments, how much do you need to invest now, in order to be able to purchase the cabin?

Answers: 3

Answer

Business, 22.06.2019 20:00

A$100 million interest rate swap has a remaining life of 10 months. under the terms of the swap, the six-month libor is exchanged semi-annually for 12% per annum. the six-month libor rate in swaps of all maturities is currently 10% per annum with continuous compounding. the six-month libor rate was 9.6% per annum two months ago. what is the current value of the swap to the party paying floating? what is its value to the party paying fixed?

Answers: 2

Answer

You know the right answer?

Suppose your company needs $17 million to build a new assembly line. Your target debt-equity ratio i...

Questions