1. A firm needs to take flotation costs into account when it is raising capital from __?___ .

2. True or False: Taking flotation costs into account will reduce the cost of new common stock.

True: Taking flotation costs into account will reduce the cost of new common stock, because you will multiply the cost of new common stock by 1 minus the flotation costsimilar to how the after-tax cost of debt is calculated.

False: Flotation costs are additional costs associated with raising new common stock.

3. Cute Camel Woodcraft Company is considering a one-year project that requires an initial investment of $500,000; however, in raising this capital, Cute Camel will incur an additional flotation cost of 6%. At the end of the year, the project is expected to produce a cash inflow of $600,000. The rate of return that Cute Camel expects to earn on the project after its flotation costs are taken into account is ___?____ .

4. Cute Camel has a current stock price of $22.35 and is expected to pay a dividend of $2.45 at the end of next year. The companys growth rate is expected to remain constant at 10%. If the issue's flotation costs are expected to equal 6% of the funds raised, the flotation-cost-adjusted cost of the firm's new common stock is ___?___ .

5. Cute Camels addition to earnings for this year is expected to be $745,000. Its target capital structure consists of 40% debt, 5% preferred stock, and 55% common stock. Cute Camel Woodcraft Companys retained earnings breakpoint is ___?___ rounded to the nearest whole dollar).