(Answered) Estimated cost of newly issued common stock

Management Studies

Problem: Coleman 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 15 percent. Coleman incorporates the flotation costs into the DCF approach. What is the estimated cost of newly issued common stock, considering the flotation costs? Be sure to support your response with specifics.

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