General Studies · Cost of Capital
Flotation costs (issue costs) incurred when issuing new shares should be incorporated into the cost of equity calculation by:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Including them completely in the project's initial capital expenditure outlay
- 2Reducing the net proceeds in the denominator of the cost of equity formula✓
- 3Adjusting the nominal dividend growth rate in the Dividend Valuation Model
- 4Adding them directly to the final WACC percentage
Correct answer
Reducing the net proceeds in the denominator of the cost of equity formula
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