BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Flotation costs are the costs that are incurred by a company when issuing new securities. The costs can be various expenses including, but not limited to, underwriting, legal, registration, and audit fees. Flotation expenses are expressed as a percentage of the issue price.

Detailed explanation-2: -The difference between the cost of existing equity and the cost of new equity is the flotation cost. The flotation cost is expressed as a percentage of the issue price and is incorporated into the price of new shares as a reduction.

Detailed explanation-3: -Flotation cost is the fees associated with the issuance of new securities. The exact cost incurred will depend on the amount of money raised, as well as the riskiness of the issuance. When a large amount of money is raised, the floatation cost as a percentage of the total raised is relatively small.

Detailed explanation-4: -Which of the following statements is true about the flotation costs that are incurred when a firm issues new securities to raise funds? The cost of issuing preferred stock is not adjusted for taxes because preferred stock dividend payments do not represent a tax-deductible expense for the firm.

Detailed explanation-5: -The preferred method for including flotation costs in the analysis is as an initial cash flow in valuation analysis. C. Whenever debt and preferred stock are raised, flotation costs are usually incorporated in the estimated cost of capital.