Which of the Following Statements Is True of Flotation Costs

question 11

Multiple Choice

Which of the following statements is true of flotation costs?

• A) Flotation costs decrease the cost of preferred stock to the issuing firm.
• B) Flotation costs are added to the issue price of preferred stock to compute the cost of preferred stock.
• C) Floatation costs are added to the cost of debt to compute the weighted average cost of capital of a firm.
• D) Floatation costs result in higher funds available from the issue of preferred stock to the firm.
• E) Floatation costs increase the rate the issuing firm must earn to pay the preferred dividend.

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Definitions:

Presidential Budget

The federal budget proposed by the president to Congress, outlining government spending priorities for the upcoming fiscal year.

Congress

The legislative branch of the federal government in countries such as the United States, consisting of two houses: the Senate and the House of Representatives, responsible for making laws.

Federal Budget

This refers to the government's estimate of spending and revenue for a specific fiscal year.

President

The elected head of a republican state.