The weights used in the computation of a project's flotation costs should be based on the:

Question

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The weights used in the computation of a project's flotation costs should be based on the firm's target debt-to-equity ratio, as this ratio reflects the desired balance between the firm's debt and equity financing. This approach ensures that the flotation costs are computed based on the company's optimal capital structure, rather than its current capital structure, which may not be ideal. Additionally, using historical debt-to-equity ratios or actual sources of funding may not be appropriate if the project has unique capital needs or financing requirements. Market values and book values may be useful for other financial calculations, but they do not provide insights into the optimal capital structure for a specific project.

The Weights Used in the Computation of a Project's Flotation