Flotation Costs for a Levered Firm Should

question 16

Multiple Choice

Flotation costs for a levered firm should:

• A)be ignored when analyzing a project because they are not an actual project cost.
• B)be spread over the life of a project thereby reducing the cash flows for each year of the project.
• C)only be considered when two projects are mutually exclusive.
• D)be weighted and included in the initial cash flow.
• E)be totally ignored when internal equity funding is utilized.

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Definitions:

Vicarious Liability

A legal principle where one party is held liable for the actions or omissions of another, typically in an employer-employee relationship.

Defamation

The act of damaging someone's reputation through false statements, either spoken (slander) or written (libel).

Duty to Be Careful

An obligation to act with a reasonable level of care and caution to avoid harm to others or their property.

Business Interruption

An event that causes significant disruption to the normal operations of a business, potentially leading to financial loss.