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Jen and Barry's Ice Cream needs $20 million in new capital to expand its production facilities. It will use 40% debt and 60% equity. The company's after-tax cost of debt is 5% and the cost of equity is 12.5%. Flotation costs will be 3% for debt and 9% for equity. Compute Jen and Barry's weighted average flotation cost.

a. 6.6%

b. 6.0%

c. 16.1%

Basic Finance, Finance

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