Generate no internal equity for the foreseeable future

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Reference no: EM13890129

Southern Alliance Company needs to raise $55 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 55 percent common stock, 15 percent preferred stock, and 30 percent debt. Flotation costs for issuing new common stock are 7 percent, for new preferred stock, 4 percent, and for new debt, 2 percent.

What is the true initial cost figure Southern should use when evaluating its project?

Reference no: EM13890129

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