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Question

Cost of issue of new shares is known as:

A Cost of equity Correct Answer Incorrect Answer
B Cost of shares Correct Answer Incorrect Answer
C Floatation cost Correct Answer Incorrect Answer
D WACC Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

The cost incurred by a company in issuing new shares is known as floatation cost. This cost includes various expenses such as underwriting fees, legal fees, printing and advertising costs, and other expenses related to the issue of new shares. These costs are deducted from the proceeds of the issue to arrive at the net amount received by the company.

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