You are the manager or The Upper Tier, a company that has a target debt-equity of rate of 0.45. The company is considering a project with an initial investment of $1,000,000. The present value of the future cash flows of the project is $1,050,000. The cost of floating equity is 9.5% and the floatation of debt is 6.6%
What should the firm use as their weighted average floatation cost?
If the firm has to invest $1,000,000 in the project how much money does it have to raise (round to nearest dollar?)
Will you invest in the project if (a) there were no floatation costs and (b) there were floatation costs?