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Southern Alliance Company needs to raise $23 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 70 percent common stock, 10 percent preferred stock, and 20 percent debt. Flotation costs for issuing new common stock are 8 percent, for new preferred stock, 7 percent, and for new debt, 6 percent. What is the true initial cost figure Southern should use when evaluating its project? (Do not round your intermediate calculations.)

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M91728913

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