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

See similar textbooks

Similar questions

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 7.0% 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.
I need help on this question ASAP: Langkasuka Holdings expects to pay an annual dividend of $1.50 per share, and stock analysts expect the dividend to grow by 7% indefinitely. If Langkasuka Holdings current share price is $25, what would the required rate of return be?
Weaver Chocolate Co. expects to earn $4.00 per share during the current year, its expected dividend payout ratio is 70%, its expected constant dividend growth rate is 6.0%, and its common stock currently sells for $45.00 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? Do not round your intermediate calculations. O a. 11.93% O b. 15.36% O c. 12.55% O d. 12.22% O e. 12.94%
I am having issues with this problem and would like some help if possible: The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 5% per year. Callahan's common stock currently sells for $21.00 per share; its last dividend was $2.40; and it will pay a $2.52 dividend at the end of the current year. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % If the firm's beta is 1.4, the risk-free rate is 5%, and the average return on the market is 14%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places. % If the firm's bonds earn a return of 13%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations. Round your answer to two decimal places. % If you have equal confidence in the…
The current stock price of Sheridan Inc., is $42.60. If the required rate of return is 30%, what is the dividend paid by this firm if the Dividend is not expected to grow in the future? Dividend paid?
Solution is incorrect. Can you try again with this: Assume Evco, Inc. has a current stock price of $54.38 and will pay a $2.05 dividend in one year; its equity cost of capital is 11%. What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current price?
Magic Candy Co. expects to earn $4.75 per share during the current year, its expected dividend payout ratio is 75%, its expected constant dividend growth rate is 5.0%, and its common stock currently sells for $50 per share. New stock can be sold to the public at the current price, but a flotation cost of 4% would be incurred. What would be the cost of equity from new common stock? (Hint: Dividend Payout Ratio = Dividend Per Share / Earnings Per Share) O 12.42% O 13.75% 12.52% 12.79% 12.13%
Choi Tech stock currently sells for $64 per share and the required return is 12 percent. The total return is evenly divided between the capital gains yield and the dividend yield. What is the current dividend per share if it's the company's policy to always maintain a constant growth rate in its dividends? What are the inputs to solve this on a BA II plus financial calculator?
You want to purchase some share of JJ Farms stock but need a rate of return of 17.5 percent to compensate for the perceived risk. What is the maximum you are willing to pay per share for this stock if the company pays a constant $2.43 annual dividend per share?
Tanrun Inc. is expected to pay an annual dividend of $0.45 per share in one year. Analysts expect the firm's dividends to grow by 6% forever. Its stock price is $38.6 and its beta is 0.8. The risk-free rate is 2% and the expected market risk premium is 4.5%. 1. What is the best guess for the cost of equity? Recall that both Dividend Growth Model and CAPM can be used to find cost of equity. Here assume the best guess is the simple average of the two.
Runtan Inc. has just paid an annual dividend of $0.45 per share. Analysts expect the firm's dividends to grow by 2% forever. Its stock price is $38.7 and its beta is 1.7. The risk-free rate is 2% and the expected return on the market portfolio is 8%. What is the best guess for the cost of equity? Recall that both Dividend Growth Model and CAPM can be used to find cost of equity. Here assume the best guess is the simple average of the two.
Franklin Co has a dividend payout ratio of 0.8 and reinvests the remainder of earnings in projects with expected return of 13%. If you expect next year's EPS (EPS1) to be $2.85and investors require a return of 8.1%, what is a fair price for the stock today? Round your answer to the nearest penny.

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS