A fiRm Needs to Raise $165 Million for a Project

question 101

Multiple Choice

A firm needs to raise $165 million for a project. If external financing is used, the firm faces flotation costs of 8% for equity and 2.5% for debt. If the project is to be financed 60% with equity and 40%
With debt, how much cash must the firm raise in order to finance the project?

• A) $128.6 million
• B) $142.2 million
• C) $161.7 million
• D) $171.6 million
• E) $175.2 million

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Definitions:

F Ratio

A statistical measure used in the analysis of variance (ANOVA) to determine the ratio of variance between groups to the variance within groups.

Significant

In a statistical context, denotes results that are unlikely to have occurred by chance, indicating a meaningful difference or relationship.

Type I Errors

False positive conclusions in statistical hypothesis testing, erroneously indicating that a novel effect exists.

Type II Errors

Occurs in hypothesis testing when the null hypothesis is falsely accepted, meaning that a real effect or difference is missed.