Problem 14-29 Flotation Costs [LO4]Chauhan Corporation has a debt-equity ratio of .9. The company is considering a newplant that will cost $119 million to build. When the company issues new equity, it incurs aflotation cost of 8.9 percent. The flotation cost on new debt is 4.4 percent.a. What is the initial cost of the plant if the company raises all equity externally? (Do notround intermediate calculations and enter your answer in dollars, not millions,rounded to the nearest whole number, e.g., 1,234,567.)b. What is the initial cost of the plant if the company typically uses 60 percent retainedearnings? (Do not round intermediate calculations and enter your answer in dollars,not millions, rounded to the nearest whole number, e.g., 1,234,567.)c. What is the initial cost of the plant if the company typically uses 100 percent retainedearnings? (Do not round intermediate calculations and enter your answer in dollars,not millions, rounded to the nearest whole number, e.g., 1,234,567.)a. Initial cash flowb. Initial cash flowc. Initial cash flow$130,650,000

External financing refers to the funds a company raises from sources outside the organization to…

Answered: Chauhan Corporation has a debt-equity…

EBK CFIN

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ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter11: The Cost Of Capital

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