For a levered firm, flotation costs should be ignored when analyzing a project b

ID: 2737189 • Letter: F

Question

For a levered firm, flotation costs should

be ignored when analyzing a project because they are not an actual project cost.

be spread over the life of a project, thereby reducing the cash flows for each year of the project.

only be considered when two projects are mutually exclusive.

be weighted and included in the initial cash flow.

be totally ignored when internal equity funding is utilized.

be ignored when analyzing a project because they are not an actual project cost.

be spread over the life of a project, thereby reducing the cash flows for each year of the project.

only be considered when two projects are mutually exclusive.

be weighted and included in the initial cash flow.

be totally ignored when internal equity funding is utilized.

be weighted and included in the initial cash flow

Flotation costs are issue expenses.

Initial cash flow= Funds needed/(1-floation costs)

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