Calculate the cost of internal common equity

Reference no: EM13263159

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: EM13263159

Questions Cloud

Draw the circuit diagram for a moore type state machine : There are to be 15 states, and the device for utilization is a 22v10 chip using 8 flip flops internal to the device. The outputs are 8 LEDs and a secondary output Z that is a 1 if states 10,11,12,13 are active.

At what tax rate would an investor be indifferent : Corporate bonds issued by a corporation currently yield 8%. Municipal bonds of equal risk currently yield 6%. At what tax rate would an investor be indifferent between these two bonds?

Compute her new rotation frequency : A 45kg figure skater is spinning on the toes of her skates at 0.50rev/s . Her arms are outstretched as far as they will go. In this orientation, What is her new rotation frequency, in revolutions per second

What is the price of the bond : What is the price of the bond if it matures in 15, 20, 25, or 30 years?

Calculate the cost of internal common 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 sha..

What is the force constant of the slinky : A slinky has a mass of 0.28 kg and negligible length. When it is stretched 1.2 m, it is found that transverse waves travel the length of the slinky in 0.68 s. What is the force constant, k, of the slinky

What is jose expected profit from the soft drink machine : Assume 250 working days in a year and ignore taxes and the time value of money. What is Jose's expected profit from the soft drink machine?

Find the speed of the truck before the collision : A 6,400-kg truck runs into the rear of a 1,000-kg car that was stationary. What was the speed of the truck before the collision

What is the price of the stock today : Thirsty Cactus Corp. just paid a dividend of $1.30 per share. The dividends are expected to grow at 23 percent for the next eight years and then level off to a growth rate of 6 percent indefinitely. If the required return is 12 percent, what is th..

User Account

All Pages