Weaver Brothers expects to earn $3.50 per share (E₁), and has an expected dividend payout ratio of 60%. Its expected constant dividend growth rate is 6.6%, and its common stock currently sells for $30 per share. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of equity from new common stock? Your answer should be between 10.15 and 16.90, rounded to 2 decimal places, with no special characters.
Weaver Brothers expects to earn $3.50 per share (E₁), and has an expected dividend payout ratio of 60%. Its expected constant dividend growth rate is 6.6%, and its common stock currently sells for $30 per share. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of equity from new common stock? Your answer should be between 10.15 and 16.90, rounded to 2 decimal places, with no special characters.
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:Weaver Brothers expects to earn $3.50 per share (E₁), and has an expected dividend payout ratio of 60%.
Its expected constant dividend growth rate is 6.6%, and its common stock currently sells for $30 per share.
New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What
would be the cost of equity from new common stock?
Your answer should be between 10.15 and 16.90, rounded to 2 decimal places, with no special characters.
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