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Unformatted text preview: equity, so: f T = .05(.75/1.75) + .08(1/1.75) = .0671 or 6.71% c. The total cost of the equipment including flotation costs is: Amount raised(1 .0671) = $20,000,000 Amount raised = $20,000,000/(1 .0671) = $21,439,510 Even if the specific funds are actually being raised completely from debt, the flotation costs, and hence true investment cost, should be valued as if the firms target capital structure is used. Sources: http://www.mhhe.com/rwj http://tychousa.umuc.edu...
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- Fall '09