MANAGEMENT

Detailed explanation-1: -What Is a Flotation Cost? Flotation costs are incurred by a publicly-traded company when it issues new securities and incurs expenses, such as underwriting fees, legal fees, and registration fees. Companies must consider the impact these fees will have on how much capital they can raise from a new issue.

Detailed explanation-2: -The average flotation cost ranges from 2% to 8%, which may vary depending on the security issued. It will decrease the amount the organization aims to raise by issuing new securities in the market.

Detailed explanation-3: -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.