Which of the following statements is correct?
A) The flotation-adjusted cost of equity will always be less than the cost of equity that has not been adjusted for flotation costs.
B) The flotation-adjusted cost of equity will always be more than the cost of equity that has not been adjusted for flotation costs.
C) The flotation-adjusted cost of equity may be more than or less than the cost of equity that has not been adjusted for flotation costs.
D) None of the statements are correct.

Question

Quizplus · Accepted Answer

The flotation-adjusted cost of equity accounts for the costs associated with issuing new equity, such as underwriting fees and other expenses. These additional costs increase the overall cost of equity compared to the unadjusted cost of equity, which does not consider these issuance expenses.

Which of the Following Statements Is Correct