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Problem:

The par value of the stock is $2.00. The earnings per share have grown at a rate of 6 percent per year, and that growth is expected to continue for the foreseeable future. The last dividend for this common stock was $2.50 per share. The broker advises that the sell price for the new issue will be $25.00 and that the total flotation costs will be 5 percent.

Required:

Question: Calculate the cost of capital for the new common stock issue.

Note: Show supporting computations in good form.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167386

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