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).

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Definitions:

Collective Action

Efforts by groups to resist and change the status quo in the service of group goals.

Individual Mobility

The ability of an individual to move within or between social strata in a society.

Group Distancing

The process by which individuals or groups distance themselves from other groups, especially those considered to be of lower status or incompatible.

Self-Esteem

Self-esteem is the subjective evaluation of one's own worth, including feelings of confidence, competence, and self-respect.