Cost of Capital: Cost of New Common Stock

the firm's hurdle rate for acceptance of the project. The second approach involves adjusting the cost of common equity as follows:

Cost of equity from new stock $=r_e=\frac{D_1}{P_0(1-F)}+g_L$

The difference between the flotation$-$adjusted cost of equity and the cost of equity calculated without the flotation adjustment represents the flotation cost adjustment.

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