Banyan Co.'s common stock currently sells for $52.25 per share. The growth rate is a constant 3%, and the company has an expected dividend yield of 5%. The expected long-run dividend payout ratio is 50%, and the expected return on equity (ROE) is 6.0%. New stock can be sold to the public at the current price, but a flotation cost of 15% 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 $52.25 per share. The growth rate is a constant 3%, and the company has an expected dividend yield of 5%. The expected long-run dividend payout ratio is 50%, and the expected return on equity (ROE) is 6.0%. New stock can be sold to the public at the current price, but a flotation cost of 15% 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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![Banyan Co.'s common stock currently sells for $52.25 per share. The growth rate is a constant 3%, and the company has an expected dividend yield of 5%. The expected long-run dividend payout ratio is 50%, and
the expected return on equity (ROE) is 6.0%. New stock can be sold to the public at the current price, but a flotation cost of 15% 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%2Ff2f707d4-6a1d-4839-a131-aec90ae36224%2F26fc302c-7fe7-49a7-9c69-282e7a3ab10e%2Fgencvrx_processed.png&w=3840&q=75)
Transcribed Image Text:Banyan Co.'s common stock currently sells for $52.25 per share. The growth rate is a constant 3%, and the company has an expected dividend yield of 5%. The expected long-run dividend payout ratio is 50%, and
the expected return on equity (ROE) is 6.0%. New stock can be sold to the public at the current price, but a flotation cost of 15% 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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