Cost of equity) The common stock for the Bestsold Corporation sells for $58. If a new issue is sold, the flotation costs are estimated to be 8 percent. The company pays 50 percent of its earnings in dividends, and a $4.00 dividend was recently paid. Earnings per share 5 years ago were $5.00. Earnings are expected to continue to grow at the same annual rate in the future as during the past 5 years. The firm's marginal tax rate s 34 percent. Calculate the cost of (a) internal common equity and (b) external common equity. a. What is the firm's cost of internal common equity? % (Round to two decimal places.)
Cost of equity) The common stock for the Bestsold Corporation sells for $58. If a new issue is sold, the flotation costs are estimated to be 8 percent. The company pays 50 percent of its earnings in dividends, and a $4.00 dividend was recently paid. Earnings per share 5 years ago were $5.00. Earnings are expected to continue to grow at the same annual rate in the future as during the past 5 years. The firm's marginal tax rate s 34 percent. Calculate the cost of (a) internal common equity and (b) external common equity. a. What is the firm's cost of internal common equity? % (Round 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
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Transcribed Image Text:(Cost of equity) The common stock for the Bestsold Corporation sells for $58. If a new issue is sold, the flotation costs are estimated to be 8 percent. The company pays 50 percent of its earnings in dividends, and a
$4.00 dividend was recently paid. Earnings per share 5 years ago were $5.00. Earnings are expected to continue to grow at the same annual rate in the future as during the past 5 years. The firm's marginal tax rate
is 34 percent. Calculate the cost of (a) internal common equity and (b) external common equity.
a. What is the firm's cost of internal common equity?
% (Round to two decimal places.)
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