West Minster Properties Is Considering a Project Which Has an Initial

question 242

Multiple Choice

West Minster Properties is considering a project which has an initial startup cost of $840,000. The firm maintains a debt-equity ratio of.60. The flotation cost of debt is 8 % and the flotation cost of equity is 13 %. The firm has sufficient internally generated equity to cover the equity cost of this project. What is the initial cost of the project including the flotation costs?

• A) $865,979
• B) $872,418
• C) $876,082
• D) $803,104
• E) $811,216

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Definitions:

Minimum AVC

The lowest point on the average variable cost curve, indicating the most cost-efficient level of production output.

Long-Run Supply Curve

A representation in economic theory of the relationship between product supply and prices that considers all possible adjustments in the market over time.

Purely Competitive

A commercial framework featuring a multitude of buyers and sellers, unimpeded access and withdrawal, and uniform products.

Increasing-Cost Industry

An industry in which production costs rise as the industry's output increases, often due to the input costs and resource limitations.