Amber Marbella is planning to invest on a certain project but will be needing of funds, fortunately its business has sufficient funds using its surplus and reserves for it to finance such project, the dividends to be paid during the current year is 20.00 per share, there is no expected growth for any dividends to be paid. Floatation cost of financing this project is expected to be at 5.00 per share. Based on the market, its share is trading for 50.00 per share. What is the cost of using such funds? a. 55.56% b. 44.44% c. 40% d. 60%

Amber Marbella is planning to invest on a certain project but will be needing of funds, fortunately its business has sufficient funds using its surplus and reserves for it to finance such project, the dividends to be paid during the current year is 20.00 per share, there is no expected growth for any dividends to be paid. Floatation cost of financing this project is expected to be at 5.00 per share. Based on the market, its share is trading for 50.00 per share. What is the cost of using such funds? a. 55.56% b. 44.44% c. 40% d. 60%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 21P

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