Home Grades Personalized Reviews Discussion Course Materials

Home Grades Personalized Reviews Discussion Course Materials Final Exam - Chapters 7-11,14, 16 09 minutes Back to Assignment Deadline Today at 09:00 PM 19. NADA PLC\'s common stock currently trades at $50.00 a share. It is expected to pay an annual dividend of $3.00 a share at the end of the yearA7A , and the constant growth rate is 6% a year. If the company issued new stock, it would incur a l0% flotation cost. What would be the cost of equity from new stock? O A. 11.56% O B. 12.67% ° C. 10.56% O D. 13.45% Continue withou saving Copyright Notices Terms of UsePrivacy Notice Security Notice Accessibility

Solution

Cost of new equity = Expected dividend / Share price * (1- floatation costs) + growth rate = 3/ 50*(1-10%) +6%

Cost of new equity = 12.67%