Cost of common equity aaa companyrsquos common stock, Ask an Expert

Finance

COST OF COMMON EQUITY AAA Company’s common stock currently trades at $25 a share. It is expected to pay an annual dividend of $1.25 a share at the end of the year (i.e. D1=$1.25), and the constant growth rate on the dividends is 6% a year.

1) What is the company’s cost of common equity?

2) If the company raises capital by issuing new stock, it would incur a 15% flotation cost (F=15%). What would be the cost of equity from new stock?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92763821

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