New buyers of Simmonds Inc. stock expect a return of about 22%. The firm pays flotation costs

Question:

New buyers of Simmonds Inc. stock expect a return of about 22%. The firm pays flotation costs of 9% when it issues new securities. What is Simmonds’ cost of equity?
a. From retained earnings?
b. From new stock?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Practical financial management

ISBN: 978-0324422634

5th Edition

Authors: William r. Lasher

See More Books

Question Posted: Sep 13, 2012 03:51 AM

See More Questions

What is the cost of equity (Ke) given RF = 2%, beta () = 1.5, expected market return (ERM) =12%? BALANCE SHEET Cash Marketable securities Accounts receivable Inventory $140,000 Accounts payable...
What is the cost of equity financing?
What is the cost of equity of a company whose shares are trading at 30.2 and which pays a dividend of 5 over five years and 6 after five years? Can you please explain how you came up with the answer
In which control account would you expect to find a provision for doubtful debts?
Consider the data set of the times taken to unload a truck at a warehouse given in DS 12.2.2. Compute the analysis of variance table and calculate the coefficient of determination R2. Check that the...
Classification of costs, manufacturing sector. The Fremont, California, plant ofNUMMI (New United Motor Manufacturing, Inc.), a joint venture of General Motors and Toyota, assembles two types of cars...
5. On January 2, 2016, Pam Corporation bought 15 percent of Sun Corporations capital stock for $30,000. Pam accounts for this investment using the cost method. Suns net income for the years ended...
Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost driversthe number of cruises and the number of passengersthat it...
9-32. VARIABLE COSTING VERSUS ABSORPTION COSTING. The Stenback Company uses an absorption-costing system based on standard costs. Variable manufacturing cost consists of direct material cost of $4...
Austin Enterprises makes and sells three types of dress shirts. Management is trying to determine the most profitable mix. Sales prices, demand, and use of manufacturing inputs follow: The company...
Harris Inc.s preferred stock was issued five years ago to yield 9%. Investors buying those shares on the secondary market today are getting a 14% return. Harris generally pays flotation costs of 12%...
Kleig Inc.s bonds are selling to yield 9%. The firm plans to sell new bonds to the general public and will therefore incur flotation costs of 6%. The companys marginal tax rate is 42%. a. What is...
BTN Inc. reports operating expenses of $27,000. Its comparative balance sheet shows that accrued liabilities decreased $6,000 and prepaid expenses increased $2,000. Compute cash used in operating...
2. Getting ready for Logarithms and Calculus! a. Fill in the chart and graph the function (I advise practicing on your scientific calculator and desmos. X f(x) = Inx 0 0.5 1 e 10...
JoJo Co. had the following balances and information for October. Beg. finished goods inventory = $30 Beg. work in process inventory = $5 Beg. raw materials inventory = $15 End. finished goods...
Subway sales have been declining since 2014. In the US, Subway has closed a number of stores due to over-expansion, outdated operations, and uninspiring menus. In Canada, Subway took a different...
Harvey Auto Parts purchased a new crane on September 1 for $35,000, paying $10,000 cash and signing a 7%, 12-month note for the remaining balance, interest to be paid at maturity. The crane is...
e4(k+1) Find the sum of the series. k = 1 8
Fiona Company expects to pay a $2.10 per share cash dividend this year on its common stock. The current market value of Fiona stock is $28.50 per share. Compute the expected dividend yield on the...
Test whether the 5-year survival rate for breast cancer is significantly different between African American and Caucasian women who are younger than 50 years of age and have localized disease....
A Florida lottery machine and printer at Store #8302 operates 360 days a year. If the machine does not work and breaks down, it costs the Florida Lottery Commission $2,000 per day. If store employees...
Give two reasons for holding liquid assets. Identify and briefly describe the popular types of liquid assets.
Explain the effects that historically low interest rates have on borrowers, lenders, savers, and retirees.
Briefly describe the basic operations ofand the products and services offered byeach of the following financial institutions (a) Commercial bank (b) Savings and loan association (c) Savings bank (d)...
Jennifer purchased a home for $1,000,000 in 2016. She paid $200,000 cash and borrowed the remaining $800,000. This is Jennifer's only residence. Assume that in year 2024, when the home had...
business plan describing company with strengths and weaknesses. Any gaps in plan. Recommendations for improvement of the plan.
You wish to buy a car today for $35,000. You plan to put 10% down and finance the rest at 5.20% p.a. for six years. You will make equal monthly payments of $_______.

New buyers of Simmonds Inc. stock expect a return of about 22%. The firm pays flotation costs

Question:

Step by Step Answer:

a New equity from retained earnings is not subject to flotation costs nor is ...View the full answer

Practical financial management

Students also viewed these Corporate Finance questions