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16. Shanos Inc. would like to finance an experimental cost-saving procedure by issuing new common stock. The corporation's existing common stock currently sells for $42.00.
16. Shanos Inc. would like to finance an experimental cost-saving procedure by issuing new common stock. The corporation's existing common stock currently sells for $42.00. Management believes that they can issue new common stock at this price, incurring flotation costs of 5% of the current market price, what is the stock's net market price (net proceeds)? a. $2.10 b. $4.20 c. $39.90 d. $42.00 17. Reuven Corp. is undergoing a major expansion. The expansion will be financed by issuing new 12-year, $1,000 par, 9.5% semiannual coupon bonds. "The market price of the bonds is $1,150 each. Reuven's flotation expense on the new bonds will be $100 per bond. What is the pre-tax cost of debt for the newly-issued bonds? a. 7.49% b. 8.82% c. 9.47% d. 10.24% 18. A company has common stock that can be sold for $28 per share. The stock paid a dividend at the end of last year of $3.25. Dividends are expected to grow at an annual rate of4% indefinitely. Flotation costs associated with the sale of stock equal $2.50 per share. What is the corporation's cost of external equity? a. 18.50%. b. 17.25%. c. 16.20%. d. 14.75%
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