[Verse 1] When companies need capital flowing in They issue stocks and bonds to begin But lawyers, bankers, underwriters too All demand their fees before deals go through These flotation costs slice the pie Making proceeds smaller than the price [Chorus] Flotation costs, they steal away From every dollar raised today Adjust your WACC, bump it high Cost of capital climbs to the sky F-C makes the true cost grow What you get is less than what you show [Verse 2] Take the net proceeds, not the gross Divide by one minus the cost If flotation eats up five percent Your adjustment factor's ninety-five cent New equity's expensive now Higher hurdle rates somehow [Chorus] Flotation costs, they steal away From every dollar raised today Adjust your WACC, bump it high Cost of capital climbs to the sky F-C makes the true cost grow What you get is less than what you show [Bridge] Investment bankers want their slice Regulatory fees extract their price Printing, legal, marketing too All these costs burden capital new Existing funds stay cheaper still Flotation hits the marginal bill [Chorus] Flotation costs, they steal away From every dollar raised today Adjust your WACC, bump it high Cost of capital climbs to the sky F-C makes the true cost grow What you get is less than what you show [Outro] Calculate with net proceeds clear True cost of capital appears Flotation makes expansion dear Factor in what disappears
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