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Category > Accounting Posted 18 Aug 2017 My Price 10.00

Flotation Costs Trower Corp. has a debt−equity ratio of .90. The company is considering

lotation Costs    Trower Corp. has a debt−equity ratio of .90. The company is considering a new plant that will cost $110 million to build. When the company issues new equity, it incurs a flotation cost of 8 percent. The flotation cost on new debt is 3.5 percent. What is the initial cost of the plant if the company raises all equity externally? What if it typically uses 60 percent retained earnings? What if all equity investment is financed through retained earnings?

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Alpha Geek
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Status NEW Posted 18 Aug 2017 01:08 PM My Price 10.00

Tro-----------wer----------- co-----------rp -----------has----------- de-----------bt -----------equ-----------ity----------- ra-----------tio-----------= 0-----------.9 -----------Tha-----------t m-----------ean-----------s d-----------ebt----------- /e-----------qui-----------ty=-----------0.9-----------/1 -----------We -----------can----------- ca-----------lcu-----------lat-----------e p-----------erc-----------ent-----------age----------- of----------- De-----------bt -----------by -----------the----------- fo-----------rmu-----------la=----------- De-----------bt/-----------(De-----------bt+-----------Equ-----------ity-----------) D-----------ebt----------- %=-----------0.9-----------/1+-----------0.9-----------=0.-----------473-----------6=4-----------7.3-----------6%

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