Ask Question
BusinessBusiness
22 March, 07:57

Suppose ALK Co. needs $13.8 million to build a new assembly line. The target debt-equity ratio is. 48. The flotation cost for new equity is 9.6 percent, but the floatation cost for debt is only 5.1 percent. What is the true cost of building the new assembly line after taking flotation costs into account

+5
Answers (1)
  1. 22 March, 10:18
    +1
    The true cost of building the new assembly line after taking flotation costs into account is $15,022,949

    Explanation:

    In order to calculate the true cost of building the new assembly line after taking flotation costs into account we would have to calculate first the Weighted average flotation cost for debt and equity as follows:

    Weighted average flotation cost for debt and equity = 0.051 * (0.48/1.48) + 0.096 * (1/1.48)

    = 0.0814054 or 8.14054%

    Therefore, Cost of building the new assembly line including flotation costs = 13,800,000 / (1-0.0814054)

    =$15,022,949

    The true cost of building the new assembly line after taking flotation costs into account is $15,022,949
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Suppose ALK Co. needs $13.8 million to build a new assembly line. The target debt-equity ratio is. 48. The flotation cost for new equity is ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
emilio works in a, power plant control room. dawn works in a coal mine what do emilio and dawn have in common
Answers (1)
Assume that the commercial banking system has checkable deposits of $10 billion and excess reserves of $1 billion at a time when the reserve requirement is 20 percent.
Answers (1)
Tech Solutions, Inc., a manufacturer of laptops, is considering a merger with Outtel, a leading producer of microprocessors and other computer chips.
Answers (1)
Which of the following is a characteristic of a monopoly? a. no barriers to entry c. it is always government owned b. a single buyer d. a single seller
Answers (2)
If the government removes a binding price ceiling from a market, then the price received by sellers will a. decrease, and the quantity sold in the market will decrease. b. decrease, and the quantity sold in the market will increase. c.
Answers (1)
New Questions in Business
Jake Skinner purchases a big screen TV on credit and will repay the loan with one payment at the end of 90 days. What type of credit did Jake use?
Answers (1)
Which most likely results from producers engaging in specialization? Producers reduce their costs. Producers increase their market share. Producers decrease the materials needed for production. Producers always offer more competitive pricing.
Answers (1)
The workers at State Hospital, a public sector employer, and Acme Inc, a private employer, are subject to speech censorship and arbitrary job termination. Constitutional issues are present only for the State Hospital workers. TrueFalse
Answers (1)
Kyle and lyle want to pool their inheritance money to make a joint investment. they are young and are willing to accept moderate to high risk over a number of years. which combination of investment options best suits their needs?
Answers (1)
Paper Clip Company sells office supplies. The following information summarizes the company's operating activities for the year: Utilities for the store $ 10 comma 300 Sales commissions 10 comma 300 Sales revenue 164 comma 100 Purchases of
Answers (1)
Home » Business » Suppose ALK Co. needs $13.8 million to build a new assembly line. The target debt-equity ratio is. 48. The flotation cost for new equity is 9.6 percent, but the floatation cost for debt is only 5.1 percent.
Sign Up Forgot Password?