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Last year the Black Water Inc. paid dividends $4.44. Company’s dividends are expected to grow at...

Last year the Black Water Inc. paid dividends $4.44. Company’s dividends are expected to grow at an annual rate of 2% forever. The company’s common stock is currently selling on the market for $61.01. The investments banker will charge flotation costs $3.03 per share. Calculate the cost of common equity financing using Gordon Model.

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Answer #1

Cost of common equity D1-P0+g Here, $ Net stock price (PO) Expected dividend (D1) Growth rate (g) 61.01 4.53 =4.44*(1+2%) 2%

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