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Machina Corporation is financing an ongoing constr...




Machina Corporation is financing an ongoing construction project. The firm needs $8 million of new capital during each of the next three years. The firm has a choice of issuing new debt and equity each year as the funds are needed, or issuing the debt now and the equity later. The firm's capital structure is 40 percent debt and 60 percent equity. Flotation costs for a single debt issue would be 1.6 percent of the gross debt proceeds. Yearly flotation costs for three separate issues of debt would be 3.0 percent of the gross amount. Ignoring time value effects due to timing of the cash flows, what is the absolute difference in dollars saved by raising the needed debt all at once in a single issue rather than in three separate issues? a. $ 0 b. $171,387 c. $140,809 d. $156,098 e. $134,400 Show all work for full credit. will this charge me again?,Hello Rachel, Could you please send me what you have? My time is running out. No worries if it's not complete. Thank you for your help in advance! Gerald


Paper#5764 | Written in 18-Jul-2015

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