Question

When a firm has flotation costs equal to 8.3 percent of the funding need, project analysts should: Multiple Choice increase the project's discount rate to offset these expenses by multiplying the company's WACC by 1.083. increase the initial project cost by multiplying that cost by 1.083. increase the initial project cost by dividing that cost by (1 − .083). add 8.3 percent to the company's firm's WACC to determine the discount rate for the project. increase the project's discount rate to offset these expenses by dividing the company's WACC by (1 − .083).

Answer 1

Answer:

C. increase the initial project cost by dividing that cost by (1 − .083)

Explanation:

Flotation cost is defined as the overall or total amount of money (cost) that an organization incurs while offering its securities to the public. They are cost incurred when a company issues it's new stock. If the flotation cost equals 8.3% of funding needed, the initial project cost should be increased by dividing that cost by (1 - 0.083).