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1. XYZ Inc. will issue new common stock to finance an expansion. The existing common stock just paid a $2.50 dividend, and dividends are expected to grow at a constant rate of 6% indefinitely. The stock sells for $32, and flotation expenses of 6% of the selling price will be incurred on new shares. What is the cost of internal equity?

2. Haroldson Inc. common stock is selling for $22 per share. The last dividend was $1.20, and dividends are expected to grow at a 6% 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?

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Financial Management, Finance

Category:- Financial Management
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