Problembrowning co expects to earn 350 per share during the, Ask an Expert

Accounting

Problem:

Browning Co. expects to earn $3.50 per share during the current year, its expected payout ratio is 30.00%, its expected constant dividend growth rate is 3.90%, and its common stock currently sells for $40.00 per share. New stock can be sold to the public at the current price, but a flotation cost of 14.50% would be incurred.

Required:

Question: What would the cost of equity from new common stock be?

Select the correct answer.

7.41%
6.75%
7.19%
7.63%
6.97%

Note: Please provide through step by step calculations.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167295

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