Flotation costs reduce the net proceeds from the sale of a bond whether sold at a premium, at a discount, or at its par value.

Question

Quizplus · Accepted Answer

Flotation costs refer to the expenses incurred by a company to issue new securities, such as bonds. These costs are deducted from the total proceeds generated from the sale of the bond, which reduces the net proceeds received by the company. This applies regardless of whether the bond is sold at a premium, at a discount, or at par value. Therefore, the statement is true.

Flotation Costs Reduce the Net Proceeds from the Sale of a Bond