Problemballack cos common stock currently sells for 3600, Ask an Expert

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Problem:

Ballack Co.'s common stock currently sells for $36.00 per share. The growth rate is a constant 14.4%, and the company has an expected dividend yield of 2%. The expected long-run dividend payout ratio is 20%, and the expected return on equity (ROE) is 18%. New stock can be sold to the public at the current price, but a flotation cost of 15% would be incurred.

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Question: What would be the cost of new equity?

Note: Show all workings.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91170418

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