Answer:
<em>a) Weighted average cost-</em>$1,320,000
<em>b) True cost of building -</em>$21,320,000
Explanation:
<em>The weighted average flotation cost is the average of the flotation cost weighted using the debt-equity proportion.</em>
<em>a) Weighted average cost</em>
Weighted average flotation cost (%)
= (6%× 0.8) + (9% × 0.2) = 6.6%
Weighted average cost in dollar= 6.6%× 20 = $1,320,000
<em />
<em>b) True cost of building </em>
<em>The true cost of the building is the sum of the cost of the building and the flotation cost </em>
=$1,320,000 + $20,000,000
= $21,320,000
=