Firm save by raising all of the debt in a single issue

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Reference no: EM131014158

Euro corporation is financing an on going construction project the firm will need $ 5,000,000of new capital during each of the next 3 years. the firm has a choice if issuing new debt or equity each year as the funds are needed or issue only debt now and equity later, its target capital structure is 40%debt and 60%b equity and it want to be at that structure in 3 years when the project has been completed debt flotation cost for a single debt issue would be 1.6% of the gross debt proceed. Yearly flotation costs for the separation issues of debt would be3.0% of the gross amount. Ignoring time value effect how much would the firm save by raising all of the debt in a single issue rather than in three separate issues?

Reference no: EM131014158

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