Martin Corporation’s common stock is currently selling for $50 per share. The current dividend (i.e., D0) is $2.00 per share. If dividends are expected to grow at 6 percent per year and if flotation costs are 10 percent, then what are the firm’s cost of retained earnings and new common stock, respectively? 71%; 10.24% 24%; 10.71% 24%; 11.38% 38%; 10.71% 31%; 9.86%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Martin Corporation’s common stock is currently selling for $50 per share. The current dividend (i.e., D0) is $2.00 per share. If dividends are expected to grow at 6 percent per year and if flotation costs are 10 percent, then what are the firm’s cost of retained earnings and new common stock, respectively?

  1. 71%; 10.24%
  2. 24%; 10.71%
  3. 24%; 11.38%
  4. 38%; 10.71%
  5. 31%;   9.86%
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