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

---

Definitions:

Caffeine Consumption

The intake of caffeine through the consumption of foods and beverages such as coffee, tea, chocolate, and some soft drinks and medications.

Heavy Drinking

Consumption of alcohol in amounts that exceed the recommended guidelines and can lead to health problems and social issues.

Vulnerability

The condition of being vulnerable to potential attacks or damage, whether it be to one's physical self or emotional wellbeing.

Coping Ability

The capacity to deal effectively with stressors, challenges, or difficult situations.