you mentioned issuing a prospectus - please briefly explain what that is and why it is required?

Why is it important that the company properly assess the impact of these costs on the funds they will raise from new securities?

above question from below

Flotation cost refers to the cost of raising new Finance. Whenever a company raises more finance from any source it entails a cost such as cost of issuing prospectus, Commission paid, underwriting cost such cost should be taken into account for computing the cost of capital.

Flotation cost of debt is lower than the cost of equity. This is because raising equity requires many legal formalities which result in higher cost of raising equity. There are various costs involved in raising equity such as legal fees, cost of issuing the prospectus, registration cost and underwriting cost. More over equity is sold in smaller amounts to various investors imposing higher transaction costs where is debt is issued in large amounts mostly to institutional investors.