When a Firm Has Flotation Costs Equal to 6

question 10

Multiple Choice

When a firm has flotation costs equal to 6 % of the funding need, it should:

• A) Increase the weighted average cost of capital (WACC) to offset these expenses by multiplying the WACC by 1.06.
• B) Increase the weighted average cost of capital (WACC) to offset these expenses by dividing the WACC by (1 -.06).
• C) Add 6 % to the weighted average cost of capital to get the discount rate for the project.
• D) Increase the initial project cost by multiplying that cost by 1.06.
• E) Increase the initial project cost by dividing that cost by (1 -.06).

---

Definitions:

Leadership

The action of leading a group of people or an organization, or the ability to do this.

Ethics Training

Programs designed to educate employees about the principles of moral behavior and decision-making in the workplace.

Ethical Standards

The principles that guide behaviors and decisions based on what is morally right and wrong.

Structured Program

A framework designed for developing software that consists of clearly defined steps or modules, making code easier to write, understand, and maintain.