Cost of common equity with flotationbanyan corsquos common, Ask an Expert

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COST OF COMMON EQUITY WITH FLOTATION

Banyan Co.’s common stock currently sells for $55.00 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 15% would be incurred. What would be the cost of new equity? Round your answer to two decimal places. Do not round your intermediate calculations.

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Financial Management, Finance

Category:- Financial Management
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