Higher flotation costs will result in all of the following EXCEPT
A) higher after-tax cost of debt.
B) higher weighted average cost of capital.
C) higher cost of retained earnings.
D) higher cost of common equity when new common shares are sold.

Question

Quizplus · Accepted Answer

Higher flotation costs will not affect the cost of retained earnings, as these are earnings that are already retained within the company and not obtained through the sale of new securities. The remaining options are all true, as higher flotation costs increase the cost of raising capital and therefore increase the cost of debt, equity, and the overall weighted average cost of capital.

Higher Flotation Costs Will Result in All of the Following