Eakins Inc.'s common stock currently sells for $55.00 per share, the company expects to earn $2.75 per share during the current year, its expected payout ratio is 70%, and its expected constant growth rate is 6.00%. New stock can be sold to the public at the current price, but a flotation cost of 8% would be incurred. By how much would the cost of new stock exceed the cost of retained earnings? A. 0.21% B. 0.30% C. 0.37% D. 0.24% E. 0.27%

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A: Growth rate refers to the rate of return earned by the investors over the amount of investment in a…

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A: Cost of equity = [ { Expected dividend / ( Current Price - Floatation Cost ) } + Growth rate ]

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A: The computation of the cost of new equity as follows:

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A: Expected Earning per share =$2.75 Expected Dividend =$2.75*70% =$1.925 Floatation Cost = 8% Growth…

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A: Required Rate of Return= growth rate + expected Dividend yield= 3%+5%= 8%

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A: Current stock price (P0) = $22.32 Expected dividend (D1) = $1.07 Price after 1 years (P1) = $23.71

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A: Computation:

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Q: By how much would the cost of new stock exceed the cost of retained earnings?

A: Retained earnings are the revenues or profits that an organization has produced to date, less any…

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A: Given: Dividend of next year = $1 Price of the share = $30 Dividend growth rate = 4% = 0.04

Q: Aboudy Corporation's stock price is currently $22.00 per share. The company has just paid a dividend…

A: The formula used is shown:

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A: Excel Spreadsheet:

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A: The capital gain yield is the annual percentage increase in the price of the stock. In the case of a…

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A: Answer:The cost of new equity (Re) can be calculated using the Gordon Growth Model, taking into…

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A: a.Calculation of Share Price of without repurchases: