10.19%
Stock price = Dividend/Dividend yield = 2/6% = 33.33
Cost of new common stock = D1/Price after flotation + growth rate
= 2/(33.33*(1-3%))+4%
= 10.19%
Expected cash dividends are $2.00, the dividend yield is 6%, flotation costs are 3% of price,...
Expected cash dividends are $2.00, the dividend yield is 8%, flotation costs are 6% of price, and the growth rate is 3%. Compute cost of new common stock. (Do not round intermediate calculations. Round your answer to 2 decimal places.) 13.61% 11.26% 12.51% 11.51%
1. Expected cash dividends are $2.50, the dividend yield is 7%, flotation costs are 5%, and the growth rate is 3%. Compute the cost of new common stock. A. 10.37% B. 8.89% C. 9.48% D. 9.34% 2. Debreu Beverages has an optimal capital structure that is 50% common equity, 40% debt, and 10% preferred stock. Debreu's pretax cost of equity is 12%. Its pretax cost of preferred stock is 7%, and its pretax cost of debt is also 7%. If...
a constant 7.2 % , and the company has an expected dividend yield of 3% . The expected long-run dividend payout Banyan Co.'s common stock currently sells for $40.75 per share. The growth rate ratio is 40%, and the expected return on equity (ROE) is 12 %. New stock can be sold to the public at the current price, but a flotation cost of 5 % would be incurred. What would be the cost of new equity? Round your answer...
Afirm's preferred stock pays an annual dividend of $6, and the stock sells for $85. Flotation costs for new issuances of preferred stock are 7% of the stock value. What is the after-tax cost of preferred stock if the firm's tax rate is 33%? (Round your answer to 2 decimal places.) Multiple Choice Ο Ο Ο Ο ο ο ο ο
COST OF COMMON EQUITY WITH FLOTATION Banyan Co.'s common stock currently sells for $54.00 per share. The growth rate is a constant 7.8%, and the company has an expected dividend yield of 2%. The expected long-run dividend payout ratio is 35%, and the expected return on equity (ROE) is 12%. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would be the cost of new equity? Round...
If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. There are two approaches to use to account for flotation costs. The first approach is to add the sum of flotation costs for the debt, preferred, and common stock and add them to the initial investment cost. Because the investment cost is increased, the project's expected rate of return is reduced so it may not meet the firm's hurdle rate for acceptance of...
9. Problem 10.13 (Cost of Common Equity with Flotation) еВook Banyan Co.'s common stock currently sells for $39.75 per share. The growth rate is a constant 5%, and the company has an expected dividend yield of 3%. The expected long-run dividend payout ratio is 40%, and the expected return on equity (ROE) is 8%. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would be the cost...
If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. There are two approaches to use to account for flotation costs. The first approach is to add the sum of flotation costs for the debt, preferred, and common stock and add them to the initial investment cost. Because the investment cost is increased, the project's expected rate of return is reduced so it may not meet the firm's hurdle rate for acceptance of...
eBook Problem 21-02 Sun Instruments expects to issue new stock at $36 a share with estimated flotation costs of 8 percent of the market price. The company currently pays a $1.90 cash dividend and has a 7 percent growth rate. What are the costs of retained earnings and new common stock? Round your answers to two decimal places. Costs of retained earnings Cost of new common stock: eBook Problem 21-02 Sun Instruments expects to issue new stock at $36 a...
Quantitative Problem: Barton Industries expects next year's annual dividend, D1, to be $2.00 and it expects dividends to grow at a constant rate g = 4%. The firm's current common stock price, P0, is $20.60. If it needs to issue new common stock, the firm will encounter a 5.4% flotation cost, F. Assume that the cost of equity calculated without the flotation adjustment is 12% and the cost of old common equity is 11.5%. What is the flotation cost adjustment...