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.

Correct Answer: C

Flotation costs are not usually incorporated in the estimated cost of capital for debt and preferred stock issues.