Your company's stock sells for $50 per share, its last dividend (Do) was $2.00, its growth rate is a constant 5 percent, and the company will incur a flotation cost of 15 percent if it sells new common stock. What is the firm's cost of new equity, re? A) 9.20% B) 9.94% C) 10.50% D) 11.75%

Your company's stock sells for $50 per share, its last dividend (Do) was $2.00, its growth rate is a constant 5 percent, and the company will incur a flotation cost of 15 percent if it sells new common stock. What is the firm's cost of new equity, re? A) 9.20% B) 9.94% C) 10.50% D) 11.75%

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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Question

Your company's stock sells for $50 per share, its last dividend (Do) was $2.00, its
growth rate is a constant 5 percent, and the company will incur a flotation cost of 15
percent if it sells new common stock. What is the firm's cost of new equity, re?
A) 9.20%
B) 9.94%
C) 10.50%
D) 11.75%

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