When a fiRm Has flOtation Costs Equal to 6 Percent

When a firm has flotation costs equal to 6 percent of the funding need, it should:

A) Increase the weighted average cost of capital (WACC) to offset these expenses by multiplying the WACC by 1.06.
B) Increase the weighted average cost of capital (WACC) to offset these expenses by dividing the WACC by (1 - .06) .
C) Add 6 percent to the weighted average cost of capital to get the discount rate for the project.
D) Increase the initial project cost by multiplying that cost by 1.06.
E) Increase the initial project cost by dividing that cost by (1 - .06) .