answersLogoWhite

0


Best Answer

Your company is considering a project that will cost $1 million.The project will generate after-tax cash flows of $250,000 per year for 7 years. The WACC is 15% and the firm's target D/E ratio is .6 The flotation cost for equity is 5% and the flotation cost for debt is 3%. What is the NPV for the project after adjusting for flotation costs?

fA = (E/V) x fE + (D/V) x fD

fA = (.375)(3%) + (.625)(5%) = 4.25%

PV of future cash flows = 1,040,105

NPV = 1,040,105 -1,000,000/(1-.0425) = -4,281

User Avatar

Wiki User

15y ago

Still curious? Ask our experts.

Chat with our AI personalities

DevinDevin
I've poured enough drinks to know that people don't always want advice—they just want to talk.
Chat with Devin
JudyJudy
Simplicity is my specialty.
Chat with Judy
TaigaTaiga
Every great hero faces trials, and you—yes, YOU—are no exception!
Chat with Taiga

Add your answer:

Earn +20 pts
Q: What are the formulae involving the calculation of flotation cost?
Write your answer...
Submit
Still have questions?
magnify glass
imp
Related questions

how do you formulae use Calculation For Contact Form 7?

This plugin in you can be using any kind of calculators like weight calculation, hotel booking quote, car renting calculation, mortgage calculator, cost calculator, finance calculator, tax calculator, and many others. You can do your form in summation, multiplication, deduction, and division as well as many other formulae.


What is the formulae of cp if profit and discount percent is given?

if profit , discount % and cost price is given write the formulae to fine cost price


If the flotation cost goes up the cost of retained earnings will?

go up


If flotation cost go down the cost of new preferred stock will go up or down?

go down


What is the meaning of the calculation?

'Ganak'.


Cost implications of management decisions involving distributions?

the cost implication of management decision involving distribution


What is a Food cost percentage?

It is a calculation that determines the % of cost to sales.


What is the formulae for loss percentage?

% loss = amount of loss / cost x 100


When determining the after tax cost of a bond the face value of the issue must be adjusted to the net proceeds amounts by considering what?

the flotation cost


When calculation the inventory turnover at cost the first step is to calculate the?

Cost of goods sold


Application of mathimatics in petroleum engineering?

Production of petroleum , calculation of consumption and calculation of cost every thing was incomplete without mathematics.


How is the moving average cost calculation used in determining the cost of inventory?

The moving average cost calculation is used to determine the average cost of inventory by taking into account the cost of goods purchased over time. This method helps to smooth out fluctuations in costs and provides a more accurate representation of the overall cost of inventory.