Asked by
Adiel Davis
on Nov 07, 2024
Verified
For a firm with both debt and equity in its capital structure, the weighted average flotation cost, fA, will simply be the sum of the %age flotation cost of debt, fD, and the %age flotation cost of equity, fE.
Weighted Average
A computation that considers the different significance levels of the figures in a dataset.
Flotation Cost
The total costs incurred by a company in offering its securities to the public, including underwriting, legal, and registration fees.
Capital Structure
The mixture of debt and equity financing a company uses to fund its operations and growth, influencing its risk and value.
- Understand the consequences of flotation costs on the capital financing of a project and the methodology for evaluating the starting costs of a project inclusive of flotation costs.
Verified Answer
KA
Learning Objectives
- Understand the consequences of flotation costs on the capital financing of a project and the methodology for evaluating the starting costs of a project inclusive of flotation costs.