Question 10 1 point Trahan Lumber Company hired you to help

Question 10 (1 point) Trahan Lumber Company hired you to help estimate its cost of capital. You obtained the following data: Di $1.25 P.-S22.50; g-5.00% (constant); and F 6.00%, what is the cost of equity raised by selling new common stock? 8.84% ) 10.91% | 11.78% 10.58% 11.35% Next Page Page 2 of 4 Save All R Go to MacBook A

Solution

P0(1-F) = D1/[(Rs-G)]

22.5(1-.06) = 1.25 /[Rs -.05]

21.15 = 1.25 /[Rs- .05]

Rs -.05 = 1.25 /21.15

Rs = .0591+.05

      = .1091 or 10.91%

correct option is \" B\"