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Problem:

Myers Corporation's stock currently trades at $40 a share. Investors estimate that the year-end dividend will be $2.00 a share and that its dividend will grow at 5% a year (i.e., D 1 = $2.00 and g = 5%). The company needs to issue new stock in order to fund its upcoming projects, and investment bankers estimate that the flotation cost will be 4%.

Required:

Question: What is Myers' cost of new external equity?

10.2%
12.0%
9.6%
11.3%
8.5%

Note: Provide thorough explanation of every question given in the problem.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91174678

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