Asked by
Jossue Alvarez
on Dec 09, 2024
Verified
Harmon, Inc. has a debt-equity ratio of.80. The firm is analyzing a new project which requires an initial cash outlay of $300,000 for new equipment. The flotation cost for new equity is 9 % and for debt 4.5 %. What is the initial cost of the project including the flotation costs?
A) $317,125
B) $320,856
C) $321,000
D) $322,581
E) $325,912
Flotation Cost
The total costs associated with issuing new stocks or bonds, including underwriting, legal, and registration fees.
Debt-Equity Ratio
A calculation of a corporation's financial risk, determined by dividing its overall liabilities by the equity of its shareholders.
Initial Cash Outlay
The initial funds required to commence a project or investment, typically including costs such as purchase price and setup expenses.
- Acquire knowledge about the role flotation costs play in the funding of projects and the process for determining the initial expenses of a project, taking into account flotation costs.
- Acquire knowledge of the essential elements of capital structure, together with the consequences of debt-to-equity ratios on financing choices.
Verified Answer
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Learning Objectives
- Acquire knowledge about the role flotation costs play in the funding of projects and the process for determining the initial expenses of a project, taking into account flotation costs.
- Acquire knowledge of the essential elements of capital structure, together with the consequences of debt-to-equity ratios on financing choices.