Suppose ALK Co

Multiple Choice

Suppose ALK Co. needs $13.8 million to build a new assembly line. The target debt-equity ratio is .48. The flotation cost for new equity is 9.6 percent, but the floatation cost for debt is only 5.1 percent. What is the true cost of building the new assembly line after taking flotation costs into account?

A) $17,306,191
B) $15,022,949
C) $16,318,414
D) $15,719,310
E) $16,666,667