Ch $09$: Assignment $-$ The Cost of Capital

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Attempts Keep the Highest $/2$

$4.$ The cost of new common stock

Flotation costs grad represent the fees that firms pay to investment bankers to help them issue new common stock.

White Lion Homebuilders has a current stock price of $$33\mathrm{.}35$ per share, and is expected to pay a per$-$share dividend of $$1\mathrm{.}36$ at the end of next year. The company's earnings' and dividends' growth rate are expected to grow at the constant rate of $9\mathrm{.}40\%$ into the foreseeable future. If White Lion expects to incur flotation costs of $3\mathrm{.}750\%$ of the value of its newly$-$raised equity funds, then the flotation$-$adjusted $($net$)$ cost of its new common stock $($rounded to two decimal places$)$ should be $(10\mathrm{.}91\%/13\mathrm{.}64\%/11\mathrm{.}59\%/13\mathrm{.}48\%)$