The Six Components That Make Up the Total Costs of New

question 52

Multiple Choice

The six components that make up the total costs of new issues are:

• A) the spread; other direct expenses such as filing fees; indirect expenses such as management time; economies of scale; abnormal returns and the Green Shoe option.
• B) the discount; other direct expenses such as filing fees; indirect expenses such as management time; due diligence costs; abnormal returns and the Green Shoe option.
• C) the spread; other direct expenses such as filing fees; indirect expenses such as management time; abnormal returns; underpricing and the Green Shoe option.
• D) the spread; other direct expenses such as filing fees; economies of scale; due diligence costs; abnormal returns and underpricing.
• E) None of these.

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Definitions:

Real Cost

The total cost of producing a good or service, including the opportunity cost of alternative uses of resources and inputs.

Wartime Shortages

Periods during war when there is a lack of availability of essential goods and resources due to increased demand and disrupted supply chains.

Opportunity Cost

The benefit missed out on when choosing one alternative over another, emphasizing the impact of choice on resource allocation.

Limited Resources

The finite availability of inputs such as labor, materials, and capital, which restricts production capabilities and economic growth.