Suppose Your Company Needs $14 Million to Build a New

question 33

Multiple Choice

Suppose your company needs $14 million to build a new assembly line.Your target debt-equity ratio is 0.84.The flotation cost for new equity is 9.5 percent,but the floatation cost for debt is only 2.5 percent.What is the true cost of building the new assembly line after taking flotation costs into account?

• A)14.82 million
• B)14.94 million
• C)15.07 million
• D)15.12 million
• E)15.23 million

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Definitions:

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