The Flotation Cost for a Firm Is Computed As

question 66

Multiple Choice

The flotation cost for a firm is computed as:

• A)the arithmetic average of the flotation costs of both debt and equity.
• B)the weighted average of the flotation costs associated with each form of financing.
• C)the geometric average of the flotation costs associated with each form of financing.
• D)one-half of the flotation cost of debt plus one-half of the flotation cost of equity.
• E)a weighted average based on the book values of the firm's debt and equity.

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Definitions:

Net Income

A company's total earnings or profit; calculated as revenues minus expenses, taxes, and the cost of goods sold.

Personal Use

Utilization of property or goods in a manner primarily for the individual's own consumption, enjoyment, or benefit, rather than for business or commercial purposes.

Capital Contributions

Monetary or non-monetary assets that are provided to a company by its owners or shareholders to increase its equity.

Capital Account

An account on a country's balance of payments that records transactions involving the acquisition or disposal of assets and liabilities.