Question

Flotation costs are incurred in the : a Primary capital market b Secondary capital market c Bond market only d Preferred equity market only

Answer 1

Flotation costs incurred in the Primary capital market

Explanation:

• Flotation or issuance costs are the heavy costs incurred by a company which is going to issue new securities (like shares, bonds) in the stock market for subscription to raise funds.
• These costs are incurred in the shape of various fees and expenses required to be paid off by the company issuing such new securities.
• These include any legal fees, investment banker's fees, registration fees, documentation expense , underwriting fees etc.