Costly Corporation is considering using external equity financing. Currently, the firm's stock is selling for $60.00 per share. The firm just paid dividend $2.0 (D0) and the annual growth rate is 5.0% indefinitely. If the firm issues new stock, the flotation costs would equal 10.0% of the stock's market value. What is the firm's cost of external equity?
Costly Corporation is considering using external equity financing. Currently, the firm's stock is selling for $60.00 per share. The firm just paid dividend $2.0 (D0) and the annual growth rate is 5.0% indefinitely. If the firm issues new stock, the flotation costs would equal 10.0% of the stock's market value. What is the firm's cost of external equity?
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 11P
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Costly Corporation is considering using external equity financing. Currently, the firm's stock is selling for $60.00 per share. The firm just paid dividend $2.0 (D0) and the annual growth rate is 5.0% indefinitely. If the firm issues new stock, the flotation costs would equal 10.0% of the stock's market value. What is the firm's cost of external equity ?
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