[amp_mcq option1=”Cost of Equity” option2=”Cost of Capital” option3=”Flotation Cost” option4=”Marginal Cost of Capital” correct=”option3″]<\/p>\n
The correct answer is: C. Flotation Cost.<\/p>\n
Flotation cost is the cost associated with the issuance of new shares of stock. It includes the costs of underwriting, legal, accounting, and printing fees. Flotation costs can be significant, especially for small companies.<\/p>\n
Cost of equity is the rate of return that a company must earn on its equity in order to satisfy its investors. It is calculated by taking the risk-free rate of return and adding a risk premium that reflects the riskiness of the company’s equity.<\/p>\n
Cost of capital is the weighted average of the cost of equity and the cost of debt. It is the rate of return that a company must earn on its investments in order to satisfy its investors and creditors.<\/p>\n
Marginal cost of capital is the cost of raising additional capital. It is the rate of return that a company must earn on its new investments in order to satisfy its investors.<\/p>\n
In conclusion, the cost of issuing new shares to the public is known as flotation cost.<\/p>\n","protected":false},"excerpt":{"rendered":"
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