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corporate finance
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your company wants to raise $25,000,000 for a new project, but flotation costs are incurred by issuing securities (underwriting, legal fees, etc) first you must determine how much of the $25,000,000 is going to be debt and equity. the company's target d/e ratio is 50% (or .50). for every $0.50 of debt raised they want to raise $1.00 in equity. $1.00 + $0.50 = $1.50 $0.50/$1.50 = 1/3 debt, that leaves the equity portion being 2/3. $25,000,000 * (1/3) = $8,333,333.33 (debt)  and $25,000,000 * (2/3) = $16,666,666.67 (equity) using the weighted average cost then you would do something like this: = (1/3) * .04 + 2/3 * .12 = .09333333 =$25,000,000/(1-.093333) = $27,573,529.40
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