Why would we account for the floatation costs as an actual cash outflow at the inititation of the project, instead of adjusting the share prices themselves for the floatation costs?
You account for the cash flow when you pay the cash.
It’s no different than accounting for the cash flow when you issue bonds at a discount: lower cash inflow today, amortize the discount over the life of the bonds.
Is there a rule that does not allow you to adjust the share prices for the floatation costs?
I’m not exactly sure by what you mean. But my guess is that you’re asking why you adjust the cash flow instead of the security price. In fact, in most finance textbooks they advicate the latter approach(adjust the security;s price).
However, the “CFA approach” is to recognize the costs of issuance as a negative cash flow at the inception of the project. After all is said and done, the reason you adjust cash flows rather than adjsut the security’s price is “because they said to do it that way.”
I think we may be confusing the cash flow statement with the balance sheet here.
Cash flows are cash flows; it doesn’t matter how you account for the stock on the balance sheet: the net proceeds are a cash inflow from financing.