Common stock sells for $58. A new issue would have flotation costs of 8%. The company...
Homework Answers
Share price = 58
Floatation cost =8%
Share price after floatation cost = 58 × ( 1 - 8%)
= 53.36
Cost of equity = Dividend / Share price after floatation cost
= 4 / 53.36
= 7.496%
So, the correct answer is 7.496%
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Common stock sells for $58. A new issue would have flotation costs
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