Shinedown Company needs to ralse $55 million to start a new project and will ralse 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 65 percent common stock, 15 percent preferred stock, and 20 percent debt. Flotation costs for Issulng new common stock are 11 percent, for new preferred stock, 8 percent, and for new debt, 5 percent. What Is the true initial cost figure the company should use when evaluating its project? (Do not round Intermedlate calculatlons and enter your answer In dollars, not mlllions, rounded to the nearest whole number, e.g., 1,234,567.) Initial cost
Shinedown Company needs to ralse $55 million to start a new project and will ralse 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 65 percent common stock, 15 percent preferred stock, and 20 percent debt. Flotation costs for Issulng new common stock are 11 percent, for new preferred stock, 8 percent, and for new debt, 5 percent. What Is the true initial cost figure the company should use when evaluating its project? (Do not round Intermedlate calculatlons and enter your answer In dollars, not mlllions, rounded to the nearest whole number, e.g., 1,234,567.) Initial cost
Chapter14: Capital Structure Management In Practice
Section: Chapter Questions
Problem 31P
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