Question
COST OF EQUITY WITH AND WITHOUT FLOTATIONJavits & Sons's common stock cur- rently trades at $30 00 a share. It is expected to pay an
COST OF EQUITY WITH AND WITHOUT FLOTATIONJavits & Sons's common stock cur- rently trades at $30 00 a share. It is expected to pay an annual dividend of $3 00 a share at the end of the yearD1$3 00 , and the constant growth rate is 5% a year.
a.What is the company's cost of common equity if all of its equity comes from retained earnings?
b.If the company issued new stock, it would incur a 10% flotation cost. What would be the cost of equity from new stock?
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Foundations Of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
11th Canadian Edition
1259024970, 978-1259265921
