What Value Should You Assign as the Flotation Cost of Internally

question 41

Multiple Choice

What value should you assign as the flotation cost of internally generated equity financing?

• A)A cost that yields the company's required rate of return on the funds utilized
• B)Fifty percent of the external flotation cost of equity
• C)A cost of zero
• D)The same cost as that of the external equity financing
• E)The same cost as that of the debt financing

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Definitions:

Doggerel

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A mathematical model in economics that represents a consumer's preference ordering over a set of goods or services.

Utility Function

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An economic measure that calculates the change in the cost of acquiring a given basket of goods and services in the current period compared to a base period, using the current period quantities as weights.