Please show steps 5. The Chilton Oil Co. just issued a dividend of $3.50 per share...

Question

Question

Please show steps

Answer 1

Answer #1

cost of existing common equity=(D1/Current price)+Growth rate

=[(3.5*1.07)/74]+0.07

=12.06%(Approx).

cost of new common equity=(D1/Current price(1-Flotation cost)+Growth rate

=[(3.5*1.07)/74(1-0.1)]+0.07

=(3.745/66.6)+0.07

=12.62%(Approx).

Add a comment

Answer 2

Similar Homework Help Questions

8, The Drogon Co. just issued a dividend of $2.11 per share on its common stock....

8, The Drogon Co. just issued a dividend of $2.11 per share on its common stock. The company is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. If the stock sells for $50 a share, what is the company's cost of equity?
The Drogon Co. just issued a dividend of $2.51 per share on its common stock. The...

The Drogon Co. just issued a dividend of $2.51 per share on its common stock. The company is expected to maintain a constant 6 percent growth rate in its dividends indefinitely. If the stock sells for $40 a share, what is the company's cost of equity? 13.28% 12.65% 6.8% 12.28% 12.02%
The Down and Out Co. just issued a dividend of $2.66 per share on its common...

The Down and Out Co. just issued a dividend of $2.66 per share on its common stock. The company is expected to maintain a constant 7 percent growth rate in its dividends indefinitely. If the stock sells for $40 a share, what is the company's cost of equity? 14.12% 7.29% 13.41% 14.82% 13.65%

The Drogon Co. just issued a dividend of $2.51 per share on its common stock. The...

The Drogon Co. just issued a dividend of $2.51 per share on its common stock. The company is expected to maintain a constant 6 percent growth rate in its dividends indefinitely. If the stock sells for $55 a share, what is the company's cost of equity? Multiple Choice О новах 10.84% о 4.95% о 10.56%
The Drogon Co. just issued a dividend of $2.46 per share on its common stock. The...

The Drogon Co. just issued a dividend of $2.46 per share on its common stock. The company is expected to maintain a constant 6 percent growth rate in its dividends indefinitely. If the stock sells for $30 a share, what is the company's cost of equity? Η Ο 14.69% Ο 8.89% Ο 14.2% Ο 13.96% Ο 15.43%
The Drogon Co. just issued a dividend of $2.70 per share on its common stock. The...

The Drogon Co. just issued a dividend of $2.70 per share on its common stock. The company is expected to maintain a constant 5.6 percent growth rate in its dividends indefinitely If the stock sells for $54 a share, what is the company's cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity

The Pierce Co. just issued a dividend of $2.35 per share on its common stock. The...

The Pierce Co. just issued a dividend of $2.35 per share on its common stock. The company is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. If the stock sells for $44 a share, what is the company's cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity %
The Down and Out Co. just issued a dividend of $2.21 per share on its common...

The Down and Out Co. just issued a dividend of $2.21 per share on its common stock. The company is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. If the stock sells for $40 a share, what is the company's cost of equity? (Do not round your intermediate calculations.) Multiple Choice 11.34% 10.8% 5.93% 10.53% 10.26%
The Down and Out Co. Just issued a dividend of $2.81 per share on its common...

The Down and Out Co. Just issued a dividend of $2.81 per share on its common stock. The company Is expected to maintain a constant 6 percent growth rate in its dividends indefinitely. If the stock sells for $50 a share, what is the company's cost of equity? (Do not round your intermediate calculations.) ? 11.96% ? 12.56% ? 11.36% ? 11.62% 0 6.08%

The Absolute Zero Co. just issued a dividend of $2.60 per share on its common stock...

The Absolute Zero Co. just issued a dividend of $2.60 per share on its common stock The company is expected to maintain a constant 5.4 percent growth rate in its dividends indefinitely. If the stock sells for $52 a share, what is the company's cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity = _______