The net proceeds used in calculation of the cost of long-term debt are funds actually received from the sale after paying for flotation costs and taxes.

Question

Quizplus · Accepted Answer

The net proceeds used in calculating the cost of long-term debt are the actual funds received from the sale after deducting the flotation costs and taxes. This is because the actual amount received by the company is the one that is available for utilization and repayment. Therefore, the cost of long-term debt is calculated based on the net amount received by the company.

The Net Proceeds Used in Calculation of the Cost of Long-Term