A Kinston ﬁrm faces direct costs of 8% of the amount of cash raised for new security sales. How much capital needs to be raised if initial project outlays total $6 million?

Question

Quizplus · Accepted Answer

Direct costs of 8% of the amount raised for new security sales implies that 92% (100% - 8%) of the capital raised will be available for the project outlays.

Let x be the amount of capital to be raised.

92% of x = 6 million

0.92x = 6 million

x = 6 million / 0.92

x = 6,521,739.13

Rounding off to the nearest thousand, we get $6,522,000, which is option C.

A Kinston ﬁRm Faces Direct Costs of 8% of the Amount