Calculate the cost of internal common equity

Assignment Help Financial Management

Reference no: EM131511010

(Cost of equity) The common stock for the Bestsold Corporation sells for $58. If a new issue is sold, the flotation costs are estimated to be 8 percent. The company pays 50 percent of its earnings in dividends, and a $4 dividend was recently paid. Earnings per share 5 years ago were $5. Earnings are expected to continue to grow at the same annual rate in the future as during the past 5 years. The firm’s marginal tax rate is 34 percent. Calculate the cost of (a) internal common equity and (b) external common equity.

Reference no: EM131511010

Questions Cloud

What inflation premium is built into five-year bond yields : Sonny Corporation's 5-year bonds yield 6.65%, and 5-year T-bonds yield 4.75%. What inflation premium (IP) is built into 5-year bond yields?

Senior bond issued by a large company : What is the required return on a 9-year, A-rated, Senior bond issued by a large company?

What was the dividend yield and capital gains yield : What was the dividend yield and the capital gains yield?

What is the value of a call option with a strike price : what is the value of a call option with a strike price of $75 and a put option with a strike price of $55?

Calculate the cost of internal common equity : Calculate the cost of (a) internal common equity and (b) external common equity.

Compact fluorescent lamp for particular lighting application : compact fluorescent lamps (CFLs) for a particular lighting application.

What is the annual coupon payment : Assume you have purchased a bond with a Par Value of $1,000.00 paying 4.5%. You paid the market price. What is the annual coupon payment?

Cost of stock in relation to the price and expected return : calculate the cost of your stock in relation to the price and expected return.

Firm needs to plow back earnings to fuel growth : No dividends will be paid on the stock over the next nine years because the firm needs to plow back earnings to fuel growth. what is the current share price?

User Account

All Pages