Because the cost of capital is used to evaluate future investment proposals, it is important to include flotation costs because such costs would be incurred if a firm were to raise new capital to fund proposed projects.

Question

Quizplus · Accepted Answer

Including flotation costs in the cost of capital calculation ensures that the evaluation of investment proposals takes into account the actual cost of raising new capital, which may have an impact on the profitability of the proposed projects.

Because the Cost of Capital Is Used to Evaluate Future