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August 21, 2014

Homework Help: Marketing, Business

Posted by Managerial Finance on Monday, April 15, 2013 at 9:30pm.

Southern Alliance Company needs to raise $25 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 55 percent common stock, 9 percent preferred stock, and 36 percent debt. Flotation costs for issuing new common stock are 12 percent, for new preferred stock, 6 percent, and for new debt, 6 percent. What is the true initial cost figure Southern should use when evaluating its project?

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