A company is thinking of issuing more common stock. Its stock's current market price is $50 a share with an expected div...
A company is thinking of issuing more common stock. Its stock's current market price is $50 a share with an expected dividend annual one year from today of $3 a share. Dividends are expected to grow 5% per year and there are no flotation costs. What is the company cost of new common stock?
Homework Answers
cost of new common stock=(D1/Current price)+Growth rate
=(3/50)+0.05
which is equal to
=11%
Add Answer to:
A company is thinking of issuing more common stock. Its stock's current market price is $50 a share with an expected div...
Sunny Day Manufacturing Company has a current stock price of $33.35 per share, and is expected...
Sunny Day Manufacturing Company has a current stock price of $33.35 per share, and is expected to pay a per-share dividend of $2.03 at the end of the year. The company’s earnings’ and dividends’ growth rate are expected to grow at the constant rate of 8.70% into the foreseeable future. If Sunny Day expects to incur flotation costs of 3.750% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new common stock (rounded to...
The cost of issuing new common stock is calculated the same way as the cost of...
The cost of issuing new common stock is calculated the same way as the cost of raising equity capital from retained earnings. True: The cost of retained earnings and the cost of new common stock are calculated in the same manner, except that the cost of retained earnings is based on the firm's existing common equity, while the cost of new common stock is based on the value of the firm's share price net of its flotation cost. False: Flotation...
Question 19 Colemans common stock is currently selling for $50 share. Its last dividend (Do) was...
Question 19 Colemans common stock is currently selling for $50 share. Its last dividend (Do) was $4.19; and dividends are expected to grow at a constant rate of 5 percent in the foreseeable future. Coleman estimates that if it issues new common stock, the flotation cost will be 10 percent. Coleman incorporates the flotation costs into the DCF approach. What is the estimated cost of newly issued common stock, considering the flotation cost?
A company's common stock has a market price of $38.00 per share and an expected dividend...
A company's common stock has a market price of $38.00 per share and an expected dividend of $2.50 per share at the end of the coming year. The growth rate in dividends has been 3%, and the company expects to be able to maintain this growth rate forever. If the company issues new shares, the issue costs are expected to be $3.00 per share. What is the component cost of new common equity raised internally by reinvesting earnings for the...
The cost of issuing new common stock is calculated the same way as the cost of raising equity capital from retained ear...
The cost of issuing new common stock is calculated the same way as the cost of raising equity capital from retained earnings. True: The cost of retained earnings and the cost of new common stock are calculated in the same manner, except that the cost of retained earnings is based on the firm's existing common equity, while the cost of new common stock is based on the value of the firm's share price net of its flotation cost. False: Flotation...
2. Falon Corp. is issuing new common stock at a market price of $28. Dividends last...
2. Falon Corp. is issuing new common stock at a market price of $28. Dividends last year were $1.30 and are expected to grow at an annual rate of 7 percent, forever. What is Falcon's cost of common equity capital? 3. Belton Distribution Company is issuing a $1,000 per value bond that pays 7 percent annual interest that is paid semiannually and matures in 15 years. Investor are willing to pay $958 for the bond. The company is in the...
Kuhn does not have any retained earnings available to finance this project, so the firm will have to issue new common stock to help fund it. Its common stock is currently selling for $22.35 per share, and it is expected to pay a dividend of $2.78 at the e
Kuhn Co. is considering a new project that will require an initial investment of $4 million. It has a target capital structure of 35% debt, 2% preferred stock, and 63% common equity. Kuhn has noncallable bonds outstanding that mature in five years with a face value of $1,000, an annual coupon rate of 10%, and a market price of $1,050.76. The yield on the company’s current bonds is a good approximation of the yield on any new bonds that it...
ADF stock paid a dividend yesterday of $3 per share. The dividend is expected to grow...
ADF stock paid a dividend yesterday of $3 per share. The dividend is expected to grow at a constant rate of 5% per year. The price of ADF's common stock today is $40 per share. If ADF decides to issue new common stock, flotation costs will equal 3% of the market price. ADF's marginal tax rate is 21%. Based on the above information, the cost of equity is: A) 20.93% B) 15.27% C) 11.33% D) 13.12%
Haroldson Inc. common stock is selling for $26 per share. The last dividend was $1.10, and...
Haroldson Inc. common stock is selling for $26 per share. The last dividend was $1.10, and dividends are expected to grow at a 7% annual rate. Flotation costs on new stock sales are 5% of the selling price. What is the cost of Haroldson Inc.'s new common stock?
A company has common stock that can be sold for $33.09 per share. The stock paid...
A company has common stock that can be sold for $33.09 per share. The stock paid a dividend at the end of last year of $1.47. Dividends are expected to grow at an annual rate of 8% indefinitely. Flotation costs associated with the sale of stock equal $5.68 per share. What is the corporation’s cost of external equity? Submit your answer as a percentage and round to two decimal places (Ex. 0.00%) Carnet Corp. will finance its next major expansion...
The cost of issuing new common stock is calculated the same way as the cost of raising equity capital from retained earnings. True: The cost of retained earnings and the cost of new common stock are calculated in the same manner, except that the cost of retained earnings is based on the firm's existing common equity, while the cost of new common stock is based on the value of the firm's share price net of its flotation cost. False: Flotation...
Question 19 Colemans common stock is currently selling for $50 share. Its last dividend (Do) was $4.19; and dividends are expected to grow at a constant rate of 5 percent in the foreseeable future. Coleman estimates that if it issues new common stock, the flotation cost will be 10 percent. Coleman incorporates the flotation costs into the DCF approach. What is the estimated cost of newly issued common stock, considering the flotation cost?
The cost of issuing new common stock is calculated the same way as the cost of raising equity capital from retained earnings. True: The cost of retained earnings and the cost of new common stock are calculated in the same manner, except that the cost of retained earnings is based on the firm's existing common equity, while the cost of new common stock is based on the value of the firm's share price net of its flotation cost. False: Flotation...
2. Falon Corp. is issuing new common stock at a market price of $28. Dividends last year were $1.30 and are expected to grow at an annual rate of 7 percent, forever. What is Falcon's cost of common equity capital? 3. Belton Distribution Company is issuing a $1,000 per value bond that pays 7 percent annual interest that is paid semiannually and matures in 15 years. Investor are willing to pay $958 for the bond. The company is in the...
Haroldson Inc. common stock is selling for $26 per share. The last dividend was $1.10, and dividends are expected to grow at a 7% annual rate. Flotation costs on new stock sales are 5% of the selling price. What is the cost of Haroldson Inc.'s new common stock?
Most questions answered within 3 hours.
-
Consider two empty containers A and B whose volumes are
10mL and 20mL respectively. 1mL of...
asked 20 minutes ago -
QUESTION 6
Determine the linear momentum of a 2,800 kg houseboat going 3
m/s.
9,100 kg.m/s...
asked 34 minutes ago -
Jor-el throws a ball upward from the top of a 728 foot building
on the planet...
asked 38 minutes ago -
Which of the following will most likely to happen if Federal
Reserve Bank decreases the money...
asked 20 minutes ago -
You’ve just joined the investment banking firm of Dewey,
Cheatum, and Howe. They’ve offered you two...
asked 15 minutes ago -
An air conditioner cools 226 m^3/min of humid air at 36 oC and
98% relative humidity...
asked 14 minutes ago -
Given P(Ec ) = 0.43, P(F) = 0.52, and P(EF) = 0.18.
Find P( E |...
asked 16 minutes ago -
Vaughn Manufacturing acquires a coal mine at a cost of $1870000.
Intangible development costs total $354000....
asked 23 minutes ago -
Question 5
What effect would a decrease in
temperature have on pressure, assuming that volume
(T)...
asked 36 minutes ago -
Draw the Lewis dot structures for the following molecules. None
of the atoms have a formal...
asked 40 minutes ago -
What does it mean when an element is radioactive?
a.
It means the element is changing...
asked 41 minutes ago -
A company deposits $6,000 in a bank at the end of every year for
10 years....
asked 40 minutes ago