Downtown Stores Can Issue Equity at a Flotation Cost of 8.76

question 39

Multiple Choice

Downtown Stores can issue equity at a flotation cost of 8.76 percent and debt at 5.93 percent.The firm currently has a debt-equity ratio of .37 but prefers a ratio of .35.What should this firm use as their weighted average flotation cost?

• A)8.26 percent
• B)8.03 percent
• C)8.34 percent
• D)8.37 percent
• E)8.00 percent

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Definitions:

Inflation

The rate of elevation in the uniform prices of goods and services, undermining the capability to buy more.

GDP Deflator

An economic metric that converts output measured at current prices into constant-dollar GDP, detaching price changes from real output changes.

Nominal GDP

Gross Domestic Product measured in current market prices, without adjustment for inflation, reflecting the value of all goods and services produced by an economy in a year.

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of all goods and services produced within a country in real terms.