Match term with the description: Flotation costs O The amount of capital expenditures made, or...

Question:

Match term with the description:

Flotation costs

  1. O The amount of capital expenditures made, or to be made, at which the Firm's marginal cost of capital increases.
  2. O The return required by providers of capital loaned to the firm.
  3. O The average cost of a firm's financial capital when averaged across all of its outstanding debt and equity capital.
  4. O This concept argues that a firm's retained earnings are not free to the firm.
  5. O A firm's shareholder wealth-maximizing combination of debt, and common and preferred stock.
  6. O These costs are generally expressed as a percentage of the total amount of securities sold, including the costs of printing the security certificates, applicable taxes, and issuance and marketing fees.
  7. O A table or graph of a firm's potential investments listed in decreasing order of their internal rates of return.
  8. O The weighted average cost of the last dollar raised by a firm, or the firm's incremental cost of capital.
  9. O This term refers to the individual sources of the firm's financing, including its debt, preferred stock, retained earnings, and newly issued common equity.
  10. O The minimum return that must be earned on a firm's investments to ensure that the firm's value does not decrease.

Stocks:

Stocks mainly refers to shares that are issued by a firm. There are various classes of shares that may exist. Different classes of stocks have different rights. These classes of stock include:

  1. Ordinary shares.
  2. Preferred shares.
  3. Differed shares.

Answer and Explanation:

The correct answer is (6) These costs are generally expressed as a percentage of the total amount of securities sold, including the costs of printing the security certificates, applicable taxes, and issuance and marketing fees.

Flotation cost refers to the cost that is incurred when issuing stocks. Stocks include shares which have different classes. Stocks are mainly issued to raise capital for the firm.


Learn more about this topic:

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Cost of Capital: Flotation Cost, NPV & Internal Equity

from Corporate Finance: Help & Review

Chapter 3 / Lesson 18
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