One Way to Account for Flotation Costs of Raising Capital

question 6

Multiple Choice

One way to account for flotation costs of raising capital is to

• A) adjust all the project's cash flows so that each year it will reflect the flotation costs.
• B) adjust the project's initial cash flow so that it will reflect the flotation costs.
• C) adjust only the project's operating cash flows to account for paying back the shareholders.
• D) adjust the project's tax burden to account for the tax implications of raising capital.

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Definitions:

Buyout

A financial transaction where a person or entity acquires the entire stake or a substantial part of a company, often resulting in a change of ownership.

Partnership Debts

Financial obligations for which all partners in a business partnership are jointly responsible.

Assignment Of Interest

The transfer of rights, title, and interest from one party to another, often pertaining to an asset or contractual agreement.

Wrongful Dissociation

In a partnership or company context, the improper withdrawal or separation of a partner or member contrary to the terms of the agreement.