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BOORMatch Y-8 (book/static) ( Coveragut Puth Commonwer ing for 2.0 Dividend ve an annual growth of 15 percent. What is the co
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Answer #1

Solution:

Last year dividend (D0)= $0.70

Growth rate (g)= 15%

Next expected dividend ( D1) = 0.70*(1+0.15)= $0.805

Current price = $23.80

Flotation cost =10%

Current price After flotation cost ( P0)= $23.80*(1-0.10) = $21.42

Cost of internal common equity = (D1/P0 )+g

Cost of internal common equity = ($0.805/$21.42) +0.15= 0.1876 or 18.76%

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