Question
1) Whitewall Tire Co. just paid an annual dividend of $1.20 on its common shares. If Whitewall is expected to increase its annual dividend by
1) Whitewall Tire Co. just paid an annual dividend of $1.20 on its common shares. If Whitewall is expected to increase its annual dividend by 3.10 percent per year into the foreseeable future and the current price of Whitewall's common shares is $17.09, what is the cost of common stock for Whitewall? (Round answer to 2 decimal places, e.g. 15.25%.)
2) Kresler Autos has preferred shares outstanding that pay annual dividends of $6, and the current price of the shares is $105. What is the after-tax cost of new preferred shares for Kresler if the flotation (issuance) costs for preferred shares are 5 percent? (Round intermediate calculations to 3 decimal places, e.g. 1.251 and final answer to 1 decimal place, e.g. 15.2%.)
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