Floatation cost

CFA Level I Corporate Finance
#1

Below is the question and answer provided by CFA Practice

A company intends to issue new common stock with floatation costs of 5.0% per share. The expected dividend next year is $0.32, and the dividend growth rate is expected to be 10% in perpetuity. Assuming the shares are issued at a price of $14.69, the cost (%) of external equity for the firm is closest to

0.1229 = [$0.32$14.69(1−0.05)]+0.10

I feel confused that CFA suggest the floatation cost seen as one time charge at T=0 , if the answer provided by CFA institute is not correct?

thanks for your help .

#2

One time charge means it is added to initial outlay of the project. But sometimes CFA questions ask you to calculate required rate of return using incorrect method, i.e. subtracting fc from the price of shares.

#3

Okay!

thank you very much !