The city of west hutchison is constructing a new road, which it estimates will cost $7.2 million. the city will finance the road with an expenditure-driven state construction grant of $1.2 million and a bond issuance of $6 million. prepare journal entries to record the following transactions and events for the city’s capital projects fund during calendar year 2019. no budgetary entries other than encumbrances should be recorded. 1. the city receives $6.2 million from the bond issuance. the face amount of the bonds is $6 million. 2. the city signs a contract with the lowest bidder, mary michel construction, to build the road at a cost o

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If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. there are two approaches to use to account for flotation costs. the first approach is to add the sum of flotation costs for the debt, preferred, and common stock and add them to the initial investment cost. because the investment cost is increased, the project's expected return is reduced so it may not meet the firm's hurdle rate for acceptance of the project. the second approach involves adjusting the cost of common equity as follows: . the difference between the flotation-adjusted cost of equity and the cost of equity calculated without the flotation adjustment represents the flotation cost adjustment. quantitative problem: barton industries expects next year's annual dividend, d1, to be $1.90 and it expects dividends to grow at a constant rate g = 4.3%. the firm's current common stock price, p0, is $22.00. if it needs to issue new common stock, the firm will encounter a 6% flotation cost, f. assume that the cost of equity calculated without the flotation adjustment is 12% and the cost of old common equity is 11.5%. what is the flotation cost adjustment that must be added to its cost of retaine

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