Question
A firm wishes to issue new shares of its stock, which already trades in the market. The current stock price is $42, the most recent
A firm wishes to issue new shares of its stock, which already trades in the market. The current stock price is $42, the most recent dividend was $4 per share, and the dividend is expected to grow at a rate of 8% forever. Flotation costs for this issue are expected to be 9%. What is the required rate of return (or financing cost) in this new issue? Note: when flotation costs are given as a percentage instead of in dollar terms, the denominator in the formula changes from (P-F) to P*(1-F). Enter your answer as a percentage, rounded to two decimals. So, if your answer is 0.123456, enter 12.34.
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