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The Accounting Convention of Permits a Company to Immediately Expense

question 9

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The accounting convention of permits a company to immediately expense assets (such as a garbage can) with small values and long useful lives.


Definitions:

Flotation Costs

Expenses incurred by a company in issuing new securities, including fees to underwriters, lawyers, and accountants.

Administrative Fees

Charges that cover the operational costs of managing investments or conducting transactions.

WACC

Weighted Average Cost of Capital; a calculation of a firm’s cost of capital where each category of capital is proportionately weighted.

Market Values

The present rate at which a service or asset is available for purchase or sale on the market.

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