Shinedown Company needs to raise $150 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 60 percent common stock, 10 percent preferred stock, and 30 percent debt. Flotation costs for issuing new common stock are 6 percent, for new preferred stock are 3 percent, and for new debt, 2 percent. What is the true initial cost figure the company should use when evaluating its project? (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
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Shinedown Company needs to raise $150 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 60 percent common stock, 10 percent preferred stock, and
30 percent debt. Flotation costs for issuing new common stock are 6 percent, for new preferred stock
are 3 percent, and for new debt, 2 percent. What is the true initial cost figure the company should use
when evaluating its project? (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.)
Transcribed Image Text:Shinedown Company needs to raise $150 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 60 percent common stock, 10 percent preferred stock, and 30 percent debt. Flotation costs for issuing new common stock are 6 percent, for new preferred stock are 3 percent, and for new debt, 2 percent. What is the true initial cost figure the company should use when evaluating its project? (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.)
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