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 this refers to the cost of using profits for reinvestment rather than raising new capital. A, B, and D are all correct because higher flotation costs will increase the cost of debt, raise the weighted average cost of capital, and increase the cost of issuing new equity.

Higher Flotation Costs Will Result in All of the Following