Your Company Is Considering a Project That Will Cost $100

question 4

Multiple Choice

Your company is considering a project that will cost $100. The project will generate after-tax cash flows of $37.50 per year for five years. The WACC is 10 percent and the firm's D/A ratio is 0.70. The flotation cost for equity is 6 percent, the flotation cost for debt is 3 percent, and your firm does not plan on issuing any preferred stock within its capital structure. If your firm follows the practice of incorporating flotation costs into the project's initial investment, what is the weighted average flotation cost for the firm?

• A) 2.90 percent
• B) 3.90 percent
• C) 3.30 percent
• D) 4.30 percent

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Definitions:

Democratic Leader

A leadership style characterized by the involvement of team members in decision-making processes, promoting equality and participation.

Management Traits

Characteristics or qualities that are often seen in successful managers, including leadership, decision-making capabilities, and the ability to motivate and guide teams.

High Concern

A state of heightened focus or worry regarding a particular issue, situation, or matter that requires attention.

Democratic Leader

A leadership style characterized by sharing decision-making responsibilities among members of the group, valuing the input of team members and stakeholders.