Banyan Co.'s common stock currently sells for $43.25 per share. The growth rate is a constant 6%, 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 7.5%. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would be the cost of new equity? Do not round intermediate calculations. Round your answer to two decimal places. %
Banyan Co.'s common stock currently sells for $43.25 per share. The growth rate is a constant 6%, 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 7.5%. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would be the cost of new equity? Do not round intermediate calculations. Round your answer to two decimal places. %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![Banyan Co.'s common stock currently sells for $43.25 per share. The growth rate is a constant 6%, 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 7.5%. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would be the cost of new equity? Do
not round intermediate calculations. Round your answer to two decimal places.
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fccb668bc-10a4-4aaf-a388-7b2b8ddb3a25%2Fb391164b-a43d-476c-bba0-8bd162056d57%2F5it1h4b_processed.png&w=3840&q=75)
Transcribed Image Text:Banyan Co.'s common stock currently sells for $43.25 per share. The growth rate is a constant 6%, 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 7.5%. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would be the cost of new equity? Do
not round intermediate calculations. Round your answer to two decimal places.
%
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