1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Digiron [165]
3 years ago
6

For a levered firm, flotation costs should

Business
1 answer:
KengaRu [80]3 years ago
5 0

Answer:

The answer is option B. For a levered firm, flotation costs should <u>be spread over the life of a project, thereby reducing the cash flows for each year of the project.</u>

Explanation:

When a company’s securities are listed on a public exchange, there is a general saying that securities are floated on the exchange. That is how the name flotation costs came about.

Flotation is actually the costs  incurred by a company in issuing its securities to public.  it is also called issuance costs.

Examples of Flotation costs include charges paid to the investment bankers, lawyers, accountants, registration fees of the securities regulator and the exchange on which the issue is to be listed.

Flotation cost would vary based on several factors, such as company’s size, issue size, issue type (debt vs equity),

In summary, Flotation costs are the cost a company incurs to issue new stock making new equity cost more than existing ones.

Business analysts argue that flotation costs are a one-time expense that should be adjusted out of future cash flows in order to not overstate the cost of capital forever.

It is based on this premise that i chose option B, which states that flotation costs be spread over the life of a project thereby reducing the cash flows for each year of the project at levered firms.

You might be interested in
Can someone buy me an iphone... i rlly need it (IT DOESNT MATTER WHICH KIND OF IPHONE !!!!!!!)
jok3333 [9.3K]

Answer:

I cant

Explanation:

IM A KID I WANT ONE TOOOOO!!!!

5 0
2 years ago
Read 2 more answers
JT Inc. produces gourmet frozen dinners for the airline industry. JT has fixed costs of $200,000 and variable costs of $8 per fr
nadezda [96]

Answer:

The operating profit for this year amounts to $ 550,000

Explanation:

Operating Profit is computed below as:

Operating Profit = Revenue - Expense (Fixed Cost + Variable Cost)

                           = $1,950,000 - ($200,000 + $1,200,000)

                           = $1,950,000 - $1,400,000

                          = $550,000

Revenue = Number of frozen dinners × Selling Price

               = 150,000 × $13

               = $1,950,000

Variable Cost = Number of frozen dinners × Cost per frozen dinner

                       = 150,000 ×  $8

                       = $1,200,000

6 0
3 years ago
What is a competency based interview?
yKpoI14uk [10]

it's an interveiw targetting a speciffic skill or Competncy

3 0
3 years ago
Disadvantages of company borrow to much money from the bank
Kruka [31]
You have to pay back interest, and the later you pay, the more you owe!<span />
5 0
3 years ago
A corporation borrowed money from a bank to build a building. The long-term note signed by the corporation is secured by a mortg
Sunny_sXe [5.5K]

Answer:

c. The balance of mortgage payable will decrease each period the loan is outstanding.

Explanation:

Since in the question it is mentioned that the coporation has to pay the amount of $80,000 to bank for 10 years in order to reply the loan so according to the given options the option c should be selected as the part of the annual payment would be considered to the loan principal amount this increase for each and every period but at the same time the interest expense amount would be reduced in each and every period at the time when loan become outstanding

4 0
3 years ago
Other questions:
  • If a person invests $100,000 now and receives $4,000 per quarter for 10 years, the nominal rate of return per year is nearest to
    7·1 answer
  • Which of the following are integral parts of the managerial process of crafting and executing strategy?
    10·1 answer
  • The conservatism constraint prescribes that:
    13·1 answer
  • A client will soon be completing a course of inpatient treatment for the treatment of schizophrenia. At what point should the ca
    14·1 answer
  • Which workplace trait means fulfilling your commitments in time or in advance?
    10·1 answer
  • Which terms is defined as a conflict of interest between the corporate shareholders and the corporate managers?
    5·1 answer
  • Your manager has asked you to recommend which one of two new types of digital camera to buy for your company's publications depa
    9·1 answer
  • You observe a closed economy that has a government deficit and positive investment. Which of the following is correct? a. Privat
    10·1 answer
  • To join together against and have nothing to do with a person, business, nation, employer, or anything else in order to coerce o
    15·1 answer
  • Olivia is a partner in Pacific Trade. In the majority of states, with respect to any partnership obligations that Olivia does no
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!