CORPORATE FINANCE (LL+CONNECT)
CORPORATE FINANCE (LL+CONNECT)
12th Edition
ISBN: 9781266427404
Author: Ross
Publisher: MCG CUSTOM
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Chapter 13, Problem 15QAP
Summary Introduction

Adequate information:

Capital required K = $75,000,000

Weight of common stock WCS = 70%

Weight of preferred stock WPS = 5%

Weight of debt Wd = 25%

Flotation cost of common stock fCS = 7%

Flotation cost of preferred stock fPS = 4%

Flotation cost of debt fd = 3%

To compute: True initial cost for the company S.

Introduction: Weighted average flotation cost is the determination of the proportion of the project to be financed with equity and the proportion to be financed with debt.

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