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Montreal Trustco expects to pay a dividend of $5 next year. Dividends are expected to grow at 3 percent forever and the market requires a
Montreal Trustco expects to pay a dividend of $5 next year. Dividends are expected to grow at 3 percent forever and the market requires a rate of return of 7 percent on its stock. Montreal Trustco can issue new stock at $125 per share with flotation costs of $20 per share. The tax rate is zero. The cost of issuing new equity to Montreal Trustco is:
a)3.00
b) 7%
c)7.76%
d)11.76
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