XYZ company issued new securities to finance a new TV show. The project cost 500000and debt-to-equity ratio is 0.9 the flotation cost is 0.06for the equity and the flotation cost for debt is 0.02 if you want to raise money from equity and debt, what is the total flotation cost for the firm? what is the total amount to be raised? if you want to raise money from equity and debt, what is the total flotation cost for the firm? what is the total amount to be raised?

XYZ company issued new securities to finance a new TV show. The project cost 500000and debt-to-equity ratio is 0.9 the flotation cost is 0.06for the equity and the flotation cost for debt is 0.02 if you want to raise money from equity and debt, what is the total flotation cost for the firm? what is the total amount to be raised? if you want to raise money from equity and debt, what is the total flotation cost for the firm? what is the total amount to be raised?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A firm needs to raise $650 million for a project; external equity financing will be required. The firm faces flotation costs of 8.0% for equity and 2.0% for debt. If the debt to equity ratio is 0.75, the average flotation cost incurred by the firm will be ________ %
Gnomes R Us is considering a new project. The company has a debt-equity ratio of .72. The company’s cost of equity is 14.7 percent, and the aftertax cost of debt is 8 percent. The firm feels that the project is riskier than the company as a whole and that it should use an adjustment factor of +2 percent. a. What is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What discount rate should the firm use for the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
If company’s debt-to-equity ratio is 0.25, what is the weighted average cost of capital for the company if the required rate of return is 12. 1% and the cost of debt is 6.5%? Assume no tax rate A 7.90% B 7.62% C 10.98% D 10.70% E 9.30% Company is considering investing in a project. After consulting with their analysts, they find that the payback period for the project is 2 years and 6 months. If cash inflows are $4, 000. then the initial investment is. Answer rounded to the nearest whole dollar
Western Wear is considering a project that requires an initial investment of $602,000. The firm maintains a debt-equity ratio of .55 and has a flotation cost of debt of 4.9 percent and a flotation cost of equity of 10.2 percent. The firm has sufficient internally generated equity to cover the equity portion of this project. What is the initial cost of the project including the flotation costs?
Speckle Delivery Systems can buy a piece of equipment that is anticipated to provide an 8% return and can be financed at 5% with debt. Later in the year, the company turns down an opportunity to buy a new machine that would yield a 15% return but would cost 17% to finance through common equity. Assume debt and common equity each represent 50% of the company’s capital structure. Compute the weighted average cost of capital (WACC). Which product(s) should be accepted in your opinion? Why?
Axon Industries needs to raise $22.41M for a new investment project. If the firm issues one-year debt, it may haveto pay an interest rate of 9.44 %, although Axon's managers believe that 5.51 % would be a fair rate given the level of risk. If the firm issues equity, they believe the equity may be underpriced by 11.26 %. What is the cost to current shareholders of financing the project out of Equity? NOTE: Provide your answers in Millions. E.G. for 100M you must enter 100.0000, for 20M you must enter 20.0000, etc.
Turnbull Co. is considering a project that requires an initial investment of $1,708,000. The firm will raise the $1,708,000 in capital by issuing $750,000 of debt at a before-tax cost of 11.1%, $78,000 of preferred stock at a cost of 12.2%, and $880,000 of equity at a cost of 14.7%. The firm faces a tax rate of 25%. What will be the WACC for this project?
Shinedown Company needs to raise $55 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, 15 percent preferred stock, and 15 percent debt. Flotation costs for issuing new common stock are 9 percent, for new preferred stock, 6 percent, and for new debt, 2 percent. What is the true initial cost figure the company should use when evaluating its project?
In an effort to increase its customer base, a company set the project MARR at exactly the WACC. If equity capital costs 8% per year and debt capital costs 12.5% for the project, what is the equity-debt percentage mix of capital required to make the WACC = 10%?
Cully 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 55 percent common stock, 10 percent preferred stock, and 35 percent debt. Flotation costs for issuing new common stock are 8 percent, for new preferred stock, 6 percent, and for new debt, 4 percent. What is the true initial cost figure Southern should use when evaluating its project? $23,589,744 $24,472,000 $24,572,650 $21,620,000 $25,555,556
Wags Dog Emporium is considering a project that requires an initial investment of $280,000. Wags maintains a debt-equity ratio of 0.55, has a flotation cost of debt of 7.5 percent and a flotation cost of equity of 10.5 percent. The firm has sufficient internally generated equity to cover the equity portion of this project and will not issue additional equity. What is the initial cost of the project including the flotation costs? Group of answer choices $263,983 $272,552 $279,592 $287,652 $311,762
Montclair Company is considering a project that will require a $500,000 loan. It presently has total liabilities of $220,000 and total assets of $620,000. 1. Compute Montclair’s (a) current debt-to-equity ratio and (b) the debt-to-equity ratio assuming it borrows $500,000 to fund the project. 2. If Montclair borrows the funds, does its financing structure become more or less risky?

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