Tower Corp. has a debt-equity ratio of .85. The company is considering a new plant that...

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?

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jeff jeffy answered 1 year ago

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