SASCO company is currently trading its common stocks at $120 per share. They expect issuing new shares will require them to sell the new share at a discount of $5 and the cost associated with issuing new shares is expected to be $4 per share. If the expected dividend next year is $20 and the expected growth rate for this company is 8%, what is their cost of new common stock?
SASCO company is currently trading its common stocks at $120 per share. They expect issuing new shares will require them to sell the new share at a discount of $5 and the cost associated with issuing new shares is expected to be $4 per share. If the expected dividend next year is $20 and the expected growth rate for this company is 8%, what is their cost of new common stock?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:SASCO company is currently trading its common
stocks at $120 per share. They expect issuing
new shares will require them to sell the new share
at a discount of $5 and the cost associated with
issuing new shares is expected to be $4 per
share. If the expected dividend next year is $20
and the expected growth rate for this company is
8%, what is their cost of new common stock?
Answer:
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