Which of the following statements is correct?
A)The flotation-adjusted cost of equity will always be less than the cost of equity that has not been adjusted for flotation costs.
B)The flotation-adjusted cost of equity will always be more than the cost of equity that has not been adjusted for flotation costs.
C)The flotation-adjusted cost of equity may be more than or less than the cost of equity that has not been adjusted for flotation costs.
D)None of these statements is correct.

Question

Quizplus · Accepted Answer

Flotation costs are additional costs incurred when a company issues new securities. Therefore, the flotation-adjusted cost of equity will always be higher than the cost of equity that has not been adjusted for these costs.

Which of the Following Statements Is Correct