5. Cost of new common stock A firm needs to take flotation costs into account when it is raising capital from True or False: The following statement accurately describes how firms make decisions related to issuing new common stock Taking flotation costs into account will reduce the cost of new common stock. O 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 cost-similar to how the after-tax cost of debt is calculated. O False: Flotation costs are additional costs associated with raising new common stock. Cute Camel Woodcraft Company is considering a one-year project that requires an initial investment of $450,000; however, in raising this capital, Cute Camel will incur an additional flotation cost of 3%. At the end of the year, the project is expected to produce a cash inflow of $630,000. The rate of return that Cute Camel expects to earn on the project after its flotation costs are taken into account is Cute Camel has a current stock price of $22.35 and is expected to pay a dividend of $2.03 at the end of next year. The company's growth rate is expected to remain constant at 8%. If the issue's flotation costs are expected to equal 3% of the funds raised, the flotation-cost-adjusted cost of the firm's new common stock is Cute Camel's addition to earnings for this year is expected to be $857,000. Its target capital structure consists of 50% debt, 5% preferred stock, and 45% common stock. Cute Camel woodcraft Company's retained earnings breakpoint is (rounded to the nearest whole dollar)