When a Firm Has Flotation Costs Equal to 8

Multiple Choice

When a firm has flotation costs equal to 8.3 percent of the funding need, project analysts should:

A) increase the project's discount rate to offset these expenses by multiplying the company's WACC by 1.083.
B) increase the project's discount rate to offset these expenses by dividing the company's WACC by (1 − .083) .
C) add 8.3 percent to the company's firm's WACC to determine the discount rate for the project.
D) increase the initial project cost by multiplying that cost by 1.083.
E) increase the initial project cost by dividing that cost by (1 − .083) .