When a Firm Has Flotation Costs Equal to 7 Percent

question 84

Multiple Choice

When a firm has flotation costs equal to 7 percent of the funding need,project analysts should:

• A)increase the project's discount rate to offset these expenses by multiplying the firm's WACC by 1.07.
• B)increase the project's discount rate to offset these expenses by dividing the firm's WACC by (1 - 0.07).
• C)add 7 percent to the firm's WACC to get the discount rate for the project.
• D)increase the initial project cost by multiplying that cost by 1.07.
• E)increase the initial project cost by dividing that cost by (1 - 0.07).

---

Definitions:

Institutional Prejudice

Discrimination that is entrenched within the policies, practices, and structures of organizations or societies.

Overt Prejudice

Explicit and openly displayed negative attitudes or beliefs towards individuals from certain groups based on characteristics such as race, ethnicity, gender, or sexual orientation.

Socially Constructed

The concept that meanings, notions, or connotations are created and maintained through social interactions and communal consensus.

Internalized Racism

Refers to the internalization by people of racist attitudes towards members of their own ethnic group, including themselves.