11. Which of the following statements about flotation costs is incorrect: Flotat

ID: 2716679 • Letter: 1

Question

11. Which of the following statements about flotation costs is incorrect:

Flotation costs for debt is typically lower than flotation costs for equity.

As a company issues more equity the flotation costs, as a percentage of the capital raised, decreases.

Due to flotation costs on equity the WACC2 is higher than WACC1.

All capital components, i.e. debt, preferred stock, retained earnings, and equity, have flotation costs.

Flotation costs represents a payment to investment banks for their services.

Answer=This following statement is incorrect

As a company issues more equity the flotation costs, as a percentage of the capital raised, decreases.

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