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Bleakly Enterprises has a capital structure of 56 percent common stock, 4 percent preferred stock, and 40 percent debt. The flotation costs are 3.7 percent for debt, 4.8 percent for preferred stock, and 5.2 percent for common stock. The corporate tax rate is 21 percent. What is the weighted average flotation cost

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Answer: 4.58%

Explanation:

The weighted average floatation cost is;

= (weight of debt * floatation for debt) + (weight of preferred stock * floatation for preferred stock) + (weight of common stock * floatation for common stock)

= (40% * 3.7%) + (4% * 4.8%) + (56% * 5.2%)

= 0.0148‬ + ‭0.00192‬ + ‭0.02912‬

= ‭0.04584‬

= 4.58%

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