could someone help me out with the explanation of the two reasons given below:
So, if it is preferred to deduct the flotation costs as part of the net present value calculation, why do we see the adjustment in the cost of capital so often in textbooks? The first reason is that it is often difficult to identify particular financing associated with a project. Using the adjustment for the flotation costs in the cost of capital may be useful if specific project financing cannot be identified. Second, by adjusting the cost of capital for the flotation costs, it is easier to demonstrate how costs of financing a company change as a company exhausts internally generated equity (i.e., retained earnings) and switches to externally generated equity (i.e., a new stock issue).