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 choices are correct.

Question

Quizplus · Accepted Answer

The flotation-adjusted cost of equity accounts for the costs associated with issuing new equity, such as underwriting fees and other expenses. These additional costs increase the overall cost of equity compared to calculations that do not adjust for these flotation costs.

Which of the Following Statements Is Correct