Cost of New Equity – Dividend Valuation Model Next year dividends = $5 share Growth Rate...
Cost of New Equity – Dividend Valuation Model
Next year dividends = $5 share
Growth Rate = 8%
Issue Price of stock = 60 per share.
Floatation cost = $4 share
Please calculate the cost of new equity using Dividend Valuation Model
Homework Answers
cost of new equity=(D1/Current price-Flotation cost)+Growth rate
=5/(60-4)+0.08
=(5/56)+0.08
=16.93%(Approx).
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