Southern Alliance Company needs to raise $26 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 13 percent, for new preferred stock, 5 percent, and for new debt, 5 percent. What is the true initial cost figure Southern should use when evaluating its project? (Do not round your intermediate calculations.) Multiple Choice $28,548,000 $29,977,827 $28,824,834 $24,006,667 $27,671,841

Southern Alliance Company needs to raise $26 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 13 percent, for new preferred stock, 5 percent, and for new debt, 5 percent. What is the true initial cost figure Southern should use when evaluating its project? (Do not round your intermediate calculations.) Multiple Choice $28,548,000 $29,977,827 $28,824,834 $24,006,667 $27,671,841

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 17P

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