Initial cost figure southern should use evaluating project

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Reference no: EM131545930

Southern Alliance Company needs to raise $24 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 60 percent common stock, 9 percent preferred stock, and 31 percent debt. Flotation costs for issuing new common stock are 8 percent, for new preferred stock, 6 percent, and for new debt, 2 percent. What is the true initial cost figure Southern should use when evaluating its project? (Do not round your intermediate calculations.)

a. $26,541,897

b. $22,720,000

c. $25,430,400

d. $24,500,213

e. $25,521,055

Reference no: EM131545930

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