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Assume a company has a project that requires an investment of $10 million. They plan to...
Assume a company has a project that requires an investment of $10 million. They plan to issue 35% debt, 15% preferred stock and 50% equity as their capital structure. The NPV of the project is $400,000 without floatation costs. Assume the floatation costs for issuing stock, preferred stock and debt are 8%, 5% and 3%, respectively. If we include flotation costs, should they accept the project? Why or why not?
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