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A firm wishes to issue new shares of its stock, which already trades in the market. The current stock price is $33, the
Posted: Sun Jun 05, 2022 10:24 am
by answerhappygod
- A Firm Wishes To Issue New Shares Of Its Stock Which Already Trades In The Market The Current Stock Price Is 33 The 1 (48.53 KiB) Viewed 38 times
A firm wishes to issue new shares of its stock, which already trades in the market. The current stock price is $33, the most recent dividend was $3 per share, and the dividend is expected to grow at a rate of 4% forever. Flotation costs for this issue are expected to be 14%. What is the required rate of return (or financing cost) in this new issue? Note: when flotation costs are given as a percentage instead of in dollar terms, the denominator in the formula changes from (P-F) to P*(1-F). Enter your answer as a percentage, rounded to two decimals. So, if your answer is 0.123456, enter 12.34.