What Value Should You Assign as the Flotation Cost of Internally-Generated

question 32

Multiple Choice

What value should you assign as the flotation cost of internally-generated equity financing?

• A)A cost that yields the firm's required rate of return on the funds utilized
• B)Fifty percent of the external flotation cost of equity
• C)A cost of zero
• D)The same cost as that of the external equity financing
• E)The same cost as that of the debt financing

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Definitions:

Total Assets

The sum of all resources owned by a company, including cash, inventory, property, and equipment, reported on the balance sheet.

Cash

Liquid currency and readily accessible funds available in checking and savings accounts, often used to meet short-term financial obligations.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or a normal operating cycle, whichever is longer.