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DE Inc.'s current (and optimal) capital structure is 40% debt, 10% preferred stock, and 50% common equity. CDE is can issue up to $20,000,000 in new bonds at par with a 7% coupon rate; any subsequent amount must carry a 2% pre added risk. The firm has $21,000,000 in retained earnings for the current period. CDE's common stock trades at $98 the common stock at t₁ is$1. Floatation costs on a new common stock issue is $2 per share. The company is growing What is the cost of equity from new common stock? If the answer is 10.45%, enter 10.45

DE Inc.'s current (and optimal) capital structure is 40% debt, 10% preferred stock, and 50% common equity. CDE is can issue up to $20,000,000 in new bonds at par with a 7% coupon rate; any subsequent amount must carry a 2% pre added risk. The firm has $21,000,000 in retained earnings for the current period. CDE's common stock trades at $98 the common stock at t₁ is$1. Floatation costs on a new common stock issue is $2 per share. The company is growing What is the cost of equity from new common stock? If the answer is 10.45%, enter 10.45

Essentials Of Investments
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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DE Inc.'s current (and optimal) capital structure is 40% debt, 10% preferred stock, and 50% common equity. CDE is can issue up to $20,000,000 in new bonds at par with a 7% coupon rate; any subsequent amount must carry a 2% pre added risk. The firm has $21,000,000 in retained earnings for the current period. CDE's common stock trades at $98 the common stock at t₁ is$1. Floatation costs on a new common stock issue is $2 per share. The company is growing What is the cost of equity from new common stock? If the answer is 10.45%, enter 10.45
Transcribed Image Text:DE Inc.'s current (and optimal) capital structure is 40% debt, 10% preferred stock, and 50% common equity. CDE is can issue up to $20,000,000 in new bonds at par with a 7% coupon rate; any subsequent amount must carry a 2% pre added risk. The firm has $21,000,000 in retained earnings for the current period. CDE's common stock trades at $98 the common stock at t₁ is$1. Floatation costs on a new common stock issue is $2 per share. The company is growing What is the cost of equity from new common stock? If the answer is 10.45%, enter 10.45
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