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Flotation Costs and the Weighted Average Cost of Capital

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  • Ezzell, John R.
  • Porter, R. Burr

Abstract

The weighted average cost of capital (Ko) is presented in virtually all textbooks in financial management and capital budgeting as a practical concept fundamental to the actual selection of optimal financial and investment alternatives. As often employed Ko can be defined aswhereKo = the weighted average cost of capital,Ks = the cost of equity capital,Kb = the cost of debt capital,S = the market value of the firm's equity,B = the market value of the firm's debt, andV = S + B, the total market value of the firm.

Suggested Citation

  • Ezzell, John R. & Porter, R. Burr, 1976. "Flotation Costs and the Weighted Average Cost of Capital," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 11(3), pages 403-413, September.
    • Handle: RePEc:cup:jfinqa:v:11:y:1976:i:03:p:403-413_02
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