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Basic Question 1 of 2
Which statement is INCORRECT? A. Flotation costs are higher in percentage terms for equity issuances than they are for debt.
B. When flotation costs are incorporated into the cost of capital, the adjusted cost of capital is more than if flotation costs were not included.
C. Whenever debt and preferred stock are raised, the preferred method is to include the flotation costs in the initial cash flow.
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I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt
Learning Outcome Statements
explain and demonstrate the correct treatment of flotation costs.
CFA® 2024 Level I Curriculum, Volume 4, Module 33.