# Finance Corporate Question 24

**Topics:**Generally Accepted Accounting Principles, Weighted mean, Finance

**Pages:**1 (260 words)

**Published:**December 13, 2012

We will use basically the same equation to calculate the weighted average flotation cost, except we will use the flotation cost for each form of financing. Doing so, we get: Flotation costs = (1/1.8)(.08) + (0.8/1.8)[(.15/1.15)(0) + (1/1.15)(.04)] = .0599, or 5.99% The total amount we need to raise to fund the new equipment will be: Amount raised cost = $50,000,000/(1 – .0599) Amount raised = $53,186,023 Since the cash flows go to perpetuity, we can calculate the present value using the equation for the PV of a perpetuity. The NPV is: NPV = –$53,186,023 + ($6,200,000/.1039) NPV = $6,488,212

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