Thinking Hat would like to start a new project which will require $25 million in the initial cost. The company is planning to raise this amount of money by selling new corporate bonds. It will generate no internal equity for the foreseeable future. Thinking Hat has a target capital structure of 55 percent common stock, 10 percent preferred stock, and 35 percent debt. Flotation costs for issuing new common stock are 10 percent, for new preferred stock, 7 percent, and for new debt, 3 percent. What is the true required initial investment that the company should use in its valuation of the project
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Home » Business » Thinking Hat would like to start a new project which will require $25 million in the initial cost. The company is planning to raise this amount of money by selling new corporate bonds. It will generate no internal equity for the foreseeable future.