How does the floation costs affect NPV decisions

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Reference no: EM13810409

Z. Company plans to raise $100 million. The flotation cost is expected ti be 8% issuing debt, 6% for issuing preferred stock and 5% for issuing common stock. How much additional capital will they need ti raise in order ti procure a net amount of $100 million? How does the floation costs affect NPV decisions?

- the firm’s 10 year 7% annual coupon bond is currently trading at $717.49

- the firm’s 10% annual dividend perpetual preferred stock with a par value of $100 is trading at $71/43

The common stock is trading at $150. Their next dividend is expected to be $5.00. the growth rate is for casted at 10%.

Reference no: EM13810409

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