Medina corp. has a debt-equity ratio of .75. the company is considering a new plant that will cost $125 million to build. when the company issues new equity, it incurs a flotation cost of 10 percent. the flotation cost on new debt is 4 percent. what is the initial cost of the plant if the company raises all equity externally?

Wisconsin snowmobile corp. is considering a switch to level production. cost efficiencies would occur under level production, and after tax costs would decline by $36,000, but inventory would increase by $300,000. wisconsin snowmobile would have to finance the extra inventory at a cost of 13.5 percent. a. determine the extra cost or savings of switching over to level production. should the company go ahead and switch to level production? b how low would interest rates need to fall before level production would be feasible?