Suppose that Brown-Murphies common shares sell for $19.50 per share, that the firm is expected to set

Question:

Suppose that Brown-Murphies’ common shares sell for $19.50 per share, that the firm is expected to set their next annual dividend at $0.57 per share, and that all future dividends are expected to grow by 4 percent per year, indefinitely. If Brown-Murphies faces a flotation cost of 13 percent on new equity issues, what will be the flotation-adjusted cost of equity?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...