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A firm is planning an expansion project that it desires to finance with newly issued common stock. The firm has an outstanding issue of common stock that just paid a dividend of $4.25 per share with a 6% constant growth rate, which is trading for $65 pershare. You have advised the firm that flotation costs will be 8% per share. What will be the cost of the newly issued common shares?

A firm is planning an expansion project that it desires to finance with newly issued common stock. The firm has an outstanding issue of common stock that just paid a dividend of $4.25 per share with a 6% constant growth rate, which is trading for $65 pershare. You have advised the firm that flotation costs will be 8% per share. What will be the cost of the newly issued common shares?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Financial Accounting Question

A firm is planning an expansion project that it desires to finance with newly issued common stock. The firm has an outstanding issue of common stock that just paid a dividend of $4.25 per share with a 6% constant growth rate, which is trading for $65 pershare. You have advised the firm that flotation costs will be 8% per share. What will be the cost of the newly issued common shares?
Transcribed Image Text:A firm is planning an expansion project that it desires to finance with newly issued common stock. The firm has an outstanding issue of common stock that just paid a dividend of $4.25 per share with a 6% constant growth rate, which is trading for $65 pershare. You have advised the firm that flotation costs will be 8% per share. What will be the cost of the newly issued common shares?
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