Flotation Costs Are Incorporated into the APV Framework by

question 45

Multiple Choice

Flotation costs are incorporated into the APV framework by

• A)adding them to the all-equity value of the project.
• B)subtracting them from the all-equity value of the project.
• C)incorporating them into the WACC.
• D)Flotation costs should not be included into APV.

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Definitions:

Long-Run Equilibrium

A state in which all firms in a market or industry are making normal profits, with no incentive for entry or exit, and all resources are optimally allocated.

Long-Run Equilibrium

A market condition where all inputs can be adjusted, firms are entering and exiting the market, and no economic profits are made, leading to a state of perfect competition.

Monopolistic Competition

An economic setup in which numerous firms offer products that are alike but not the same, enabling competition to revolve around quality, pricing, and promotional strategies.

Average Total Cost

The average cost per unit of output, calculated by dividing the total cost by the quantity of output produced.