Analysts of the ICM Corporation have indicated that the company is expected to grow at a 5

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Analysts of the ICM Corporation have indicated that the company is expected to grow at a 5 percent rate for as long as it is in business. Currently, ICM’s stock is selling for $70 per share. The most recent dividend paid by the company was $5.60 per share. If ICM issues new common stock, it will incur flotation costs equal to 7 percent. ICM’s marginal tax rate is 35 percent. What is its cost of retained earnings—that is, its internal equity? What is its cost of new equity?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Principles of Finance

ISBN: 978-1285429649

6th edition

Authors: Scott Besley, Eugene F. Brigham

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