Lucas Corp. has a debt-equity ratio of .85. The company is considering a new plant that will cost $120 million to build. When the company issues new equity, it incurs a flotation cost of 9 percent. The flotation cost on new debt is 4.5 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, rounded to the nearest whole dollar amount, e.g., 1,234,567.) b. What is the initial cost of the plant if the company typically uses 65 percent retained earnings? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole dollar amount, 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, rounded to the nearest whole dollar amount, e.g., 1,234,567.) a. Initial cash flow b. Initial cash flow C. Initial cash flow
Lucas Corp. has a debt-equity ratio of .85. The company is considering a new plant that will cost $120 million to build. When the company issues new equity, it incurs a flotation cost of 9 percent. The flotation cost on new debt is 4.5 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, rounded to the nearest whole dollar amount, e.g., 1,234,567.) b. What is the initial cost of the plant if the company typically uses 65 percent retained earnings? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole dollar amount, 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, rounded to the nearest whole dollar amount, e.g., 1,234,567.) a. Initial cash flow b. Initial cash flow C. Initial cash flow
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
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Lucas Corp has a debt-equity ratio of 85. The company is considering a new plant that
will cost $120 million to build. When the company issues new equity, it incurs a flotation
cost of 9 percent. The flotation cost on new debt is 4.5 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,
rounded to the nearest whole dollar amount, e.g., 1,234,567.)
b.What is the initial cost of the plant if the company typically uses 65 percent retained
earnings? (Do not round intermediate calculations and enter your answer in dollars,
not millions, rounded to the nearest whole dollar amount, 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, rounded to the nearest whole dollar amount, e.g., 1,234,567.)
a.
Initial cash flow
b. Initial cash flow
C.
Initial cash flow
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