Questions
FIN*3311*01 Homework 2
Single choice
The flotation cost for a company is computed as:
Options
A.the arithmetic average of the flotation costs of both debt and equity.
B.the weighted average of the flotation costs associated with each form of financing.
C.the geometric average of the flotation costs associated with each form of financing.
D.one-half of the flotation cost of debt plus one-half of the flotation cost of equity.
E.a weighted average based on the book values of the company's outstanding securities.
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Step-by-Step Analysis
Question restatement: The flotation cost for a company is computed as:
Options:
1) the arithmetic average of the flotation costs of both debt and equity.
2) the weighted average of the flotation costs associated with each form of financing.
3) the geometric average of the flotation costs associated with each form of financing.
4) one-half of the flotation cost of debt plus one-half of the flotation cost of equity.
5) a weighted average based on the book values of the company's outstanding securities.
Analysis of each option:
Option 1: 'the arithmetic average of the flotation costs of both debt ......Login to view full explanationLog in for full answers
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