Reference no: EM132347739
Sheaves Corp. has a debt/equity ratio of .8. The company is considering a new plant that will cost $100 million to build. When the company issues new equity, it incurs a flotation cost of 7 percent. The flotation cost on new debt is 2.5 percent.
What is the initial cost of the plant if the company raises all equity externally? (Enter your answer as dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.)
Initial Cash Flow $____________
What is the initial cost of the plant if the company typically uses 100 percent retained earnings for equity financing? (Enter your answer as dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.)
Initial Cash Flow $____________
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