Describe why the needed funds are relatively small

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Suppose your company needs $15 million to build a new assembly line. Your target debt equity ratio is .60. The flotation cost for new equity is 8 percent, but the flotation cost for debt is only 5 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small.

Reference no: EM13334520

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