In: Finance
Tower Corp. has a debt-equity ratio of .85. The company is considering a new plant that will cost $145 million to build. When the company issues new equity, it incurs a flotation cost of 8%. The flotation cost on new debt is 3.5%.
A) What is the initial cost of the plant if the company raises all equity externally?
B) What if it typically uses 60% retained earnings?
C) What if all equity investments are financed through retained earnings?
Solve using only a financial calculator
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