For a firm with both debt and equity in its capital structure, the weighted average flotation cost, f_A, will simply be the sum of the %age flotation cost of debt, f_D, and the %age flotation cost of equity, f_E.

Question

Quizplus · Accepted Answer

The weighted average flotation cost is calculated by taking the proportion of each type of financing (debt and equity) in the total financing mix and multiplying it by the respective flotation costs for debt and equity, then summing these products, not by simply adding the percentage flotation costs of debt and equity.

For a Firm with Both Debt and Equity in Its