[flop310]

Hello,

When finding WACC are flotation costs ignored? I am confused. Please explain.

[Kodiak]

My understanding is that it is included if you're evaluating the cost of equity with preferred stock.

Cash dividend on PS / (stock price – float) = actual cost of equity capital

AUD - Pass
FAR - Pass
BEC - Pass
REG - Nov

[Anonymous]

Think of it as Outflows / Inflows

For example: (Corporation A issued 10% preferred stock valued for $40 at $20 par. Issuing costs are 5$.

Outflows = .1 * 20 = $2 Dividend issued

Inflows = 40 – 5 Float costs = $35

2/35 = %5.7 cost of equity capital

[flop310]

Ok perfect, thank you!

[Author]

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