Adequate information: Capital required K = $75,000,000 Weight of common stock W CS = 70% Weight of preferred stock W PS = 5% Weight of debt W d = 25% Flotation cost of common stock f CS = 7% Flotation cost of preferred stock f PS = 4% Flotation cost of debt f d = 3% To compute: True initial cost for the company S. Introduction: Weighted average flotation cost is the determination of the proportion of the project to be financed with equity and the proportion to be financed with debt.

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Chapter 13, Problem 15QAP

Summary Introduction

Adequate information:

Capital required K = $75,000,000

Weight of common stock WCS = 70%

Weight of preferred stock WPS = 5%

Weight of debt Wd = 25%

Flotation cost of common stock fCS = 7%

Flotation cost of preferred stock fPS = 4%

Flotation cost of debt fd = 3%

To compute: True initial cost for the company S.

Introduction: Weighted average flotation cost is the determination of the proportion of the project to be financed with equity and the proportion to be financed with debt.

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