please help 10. Beta Corporation issued new common stock at a market price of 40 Lira....

Question

Question

please help

Answer 1

Answer #1

COST OF EQUITY

Cost of Equity=(CMV/DPS x (1- F))+GRD

= (2/40(1-0.015)) + 4 %

= 4.925 + 4% = 8.925%

where

:DPS=dividends per share, for next year

CMV=current market value of stock

GRD=growth rate of dividends

F = ratio of flotation cost

REQUIRED RATE OF RETURN

RRR=(Expected dividend payment/Stock prices) +Forecasted dividend growth rate

= (2/40) + 4 %

= 5 % + 4 % = 9 %

Answer 2

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