The ordinary shares of ABC Company are currently trading at $6. A new share would be made at an offer price of $5.90. Issue costs are expected to be 4% of the proceeds of the issue. The last dividend was $0.60 and the next dividend is due a year from now. The estimated growth rate is 4% p.a. What is ABC Company's after tax cost of an ordinary share issue is: Select one: A. 15% B. 13% C. 16% D. 14%
The ordinary shares of ABC Company are currently trading at $6. A new share would be made at an offer price of $5.90. Issue costs are expected to be 4% of the proceeds of the issue. The last dividend was $0.60 and the next dividend is due a year from now. The estimated growth rate is 4% p.a. What is ABC Company's after tax cost of an ordinary share issue is: Select one: A. 15% B. 13% C. 16% D. 14%
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
Problem 1PS
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Transcribed Image Text:The ordinary shares of ABC Company are currently trading at $6. A new share would be made at an offer price of
$5.90. Issue costs are expected to be 4% of the proceeds of the issue. The last dividend was $0.60 and the next
dividend is due a year from now. The estimated growth rate is 4% p.a.
What is ABC Company's after tax cost of an ordinary share issue is:
Select one:
A. 15%
B. 13%
C. 16%
D. 14%
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