Question 4 Builtrite's common stock is currently selling for $87 a share and the firm just paid an annual dividend of $3.20 per share. Management believes that dividends and earnings should grow at 7% annually. Since new stock would need to be sold to finance an expansion, Builtrite expects flotation costs to be 5% of the expected selling price of $87 a share. Based on this, and a marginal tax rate of 34%, what is the cost of new common stock? 11.68% 7.35% 11.14% 12.41% Next >

Question 4 Builtrite's common stock is currently selling for $87 a share and the firm just paid an annual dividend of $3.20 per share. Management believes that dividends and earnings should grow at 7% annually. Since new stock would need to be sold to finance an expansion, Builtrite expects flotation costs to be 5% of the expected selling price of $87 a share. Based on this, and a marginal tax rate of 34%, what is the cost of new common stock? 11.68% 7.95% 11.148 12.41%