Egypt Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling
Question:
Egypt Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for US$57.50. The firm expects to pay a US$3.40 dividend at the end of the year (2013). The dividends for the past 5 years are shown in the following table.
YearDividend
2012.............US$3.10
2011..................2.92
2010..................2.60
2009..................2.30
2008..................2.12
After underpricing and flotation costs, the firm expects to net US$52 per share on a new issue.
a. Determine the growth rate of dividends.
b. Determine the net proceeds, Nn, that the firm will actually receive.
c. Using the constant-growth valuation model, determine the cost of retained earnings, rr.
d. Using the constant-growth valuation model, determine the cost of new common stock, rn.
Common StockCommon stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... 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...
Step by Step Answer:
a delete From FVIF table the factor close...View the full answer
Principles of Managerial Finance
ISBN: 978-1408271582
Arab World Edition
Authors: Lawrence J. Gitman, Chad J. Zutter, Wajeeh Elali, Amer Al Roubaix
