O True: Taking flotation costs into account will reduce the cost of new common stock, because you will multiply the cost of new common

stock by 1 minus the flotation cost-similar to how the after-tax cost of debt is calculated.

False: Flotation costs are additional costs associated with raising new common stock.

Sunny Day Manufacturing Company is considering investing in a one-year project that requires an initial investment of $450,000. To do so, it will have to issue new common stock and will incur a flotation cost of 2.00%. At the end of the year, the project is expected to produce a cash inflow of $595,000. The rate of return that Sunny Day expects to earn on its project (net of its flotation costs) is

(rounded to two decimal

places).

White Lion Homebuilders has a current stock price of $33.35 per share, and is expected to pay a per-share dividend of $2.03 at the end of the year.

The company's earnings" and dividends" growth rate are expected to grow at the constant rate of 8.70% into the foreseeable future. If White Lion expects to incur flotation costs of 5.00% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new common stock (rounded to two decimal places) should be

Sunny Day Manufacturing Company Co.'s addition to earnings for this year is expected to be $745,000. Its target capital structure consists of 50% debt, 5% preferred, and 45% equity. Determine Sunny Day Manufacturing Company's retained earnings breakpoint:

O $1,655,556

O $1,738,334

O $1,986,667

O $1,903,889

True: Taking flotation costs into account will reduce the cost of new common stock, because you will multiply the cost of new common stock by 1 minus the flotation cost-similar to how the after-tax cost of debt is calculated. False: Fotation costs are additional costs associated with raising new common stock. Sunny Day Manufacturing Company is considering investing in a one-year project that requires an initial investment of $450, 000 . To do so, it will have to issue new common stock and will incur a flotation cost of 2.00%. At the end of the year, the project is expected to produce a cash inflow of 5595,000 . The rate of retum that Sunny Day expects to eam on its project (net of its flotation costs) is (rounded to two decimal places). White Lion Homebullders has a current stock price of $33.35 per share, and is expected to pay a per-share dividend of $2.03 at the end of the year. The compony's eamings' and dividends' growth rate are expected to grow at the constant rate of 8.70% into the foreseeable future. If White Lion. expects to incur flotation costs of 5,00% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new common stock (rounded to two decimal places) should be Sunny Day Manufacturing Company Co.si addition to earnings for this year is expected to be $745,000. Its target capital structure consists of 50% debt, 5% preferred, and 45% equity. Determine Sunny Day Manufacturing Company's retained earnings breakpoint: $1,655,556 $1,738,334 31,986,667 $1,903,889