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What is your company weighted average flotation cost

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Question - Suppose your company needs $18 million to build a new assembly line. Your target debt-equity ratio is .7. The flotation cost for new equity is 7 percent, but the flotation cost for debt is only 4 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.

Required - What is your company's weighted average flotation cost, assuming all equity is raised externally?

Reference no: EM133041867

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