Concept explainers
Cost of new common equity also known as external capital equity is similar to the cost of
Here,
Dividend expected to be paid next year is “
Price of the stock today is “
Flotation cost expressed in percentage is “F”
The company’s cost of retained earnings is 15.5 percent and currently sells its stock for $32. Its expected next dividend is $3.36 and flotation cost of new common equity is 6.5 percent.
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