Chauhan Corporation has a debt-equity ratio of .80. The company is considering a new plant that will cost $118 million to build. When the company issues new equity, it incurs a flotation cost of 8.8 percent. The flotation cost on new debt is 4.3 percent. a. What is the initial cost of the plant if the company raises all equity externally? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. What is the initial cost of the plant if the company typically uses 55 percent retained earnings? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) c. What is the initial cost of the plant if the company typically uses 100 percent retained earnings? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.)

Chauhan Corporation has a debt-equity ratio of .80. The company is considering a new plant that will cost $118 million to build. When the company issues new equity, it incurs a flotation cost of 8.8 percent. The flotation cost on new debt is 4.3 percent. a. What is the initial cost of the plant if the company raises all equity externally? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. What is the initial cost of the plant if the company typically uses 55 percent retained earnings? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) c. What is the initial cost of the plant if the company typically uses 100 percent retained earnings? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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hi, this is my finance question. i need answer asap.
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 8 percent, for new preferred stock, 6 percent, and for new debt, 4 percent. What is the true initial cost figure Southern should use when evaluating its project? $23,589,744 $24,472,000 $24,572,650 $21,620,000 $25,555,556

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