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 65 percent common stock. 9 percent preferred stock, and 26 percent debt. Flotation costs for issuing new common stock are 13 percent, for new preferred stock. 6 percent, and for new debt. 3 percent. What is the true initial cost figure Southern should use when evaluating its project? Multiple Choice $21,313,333 $25.247:00 $26,510,030 $24.470.796 $25.490.413
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 65 percent common stock. 9 percent preferred stock, and 26 percent debt. Flotation costs for issuing new common stock are 13 percent, for new preferred stock. 6 percent, and for new debt. 3 percent. What is the true initial cost figure Southern should use when evaluating its project? Multiple Choice $21,313,333 $25.247:00 $26,510,030 $24.470.796 $25.490.413
Chapter14: Capital Structure Management In Practice
Section: Chapter Questions
Problem 21P
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Question
![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 65 percent common stock. 9
percent preferred stock, and 26 percent debt. Flotation costs for issuing new common
stock are 13 percent, for new preferred stock. 6 percent, and for new debt. 3 percent.
What is the true initial cost figure Southern should use when evaluating its project?
Multiple Choice
$21,313,333
$25.247100
$26.510,030
$24.470796
$25.490,413](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Feeee41a6-2075-4c2b-98f8-3210cfe44b29%2F0e2fa92f-8967-42a6-b0d0-c2c359f30e03%2F63b9y4_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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 65 percent common stock. 9
percent preferred stock, and 26 percent debt. Flotation costs for issuing new common
stock are 13 percent, for new preferred stock. 6 percent, and for new debt. 3 percent.
What is the true initial cost figure Southern should use when evaluating its project?
Multiple Choice
$21,313,333
$25.247100
$26.510,030
$24.470796
$25.490,413
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