Compute the cost of internal equity and external equity

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Reference no: EM131179766

Verigreen Lawn Care products just paid a dividend of $1.85. This dividend is expected to grow at a constant rate of 3 percent per year, so the next expected dividend is $1.90. The stock price is currently $12.50. New stock can be sold at this price subject to flotation costs of 15 percent. The company’s marginal tax rate is 40 percent. Compute the cost of internal equity (e.g. retained earnings) and the cost of external equity (e.g new common stock)

Reference no: EM131179766

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