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Determine the cost of external equity capital

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Reference no: EM132957146

The following financial information is available on Jacobee Incorporation:

Current per share market price: $18.00

Current (t = 0) per share dividend: $1.50

Expected long-term growth rate: 8.00%

Jacobee can issue new common stock to net the company $16.50 per share.

Problem 1: Determine the cost of external equity capital using the dividend capitalization model approach.

Option 1: 17.82%

Option 2: 17.00%

Option 3: 17.09%

Option 4: 16.33%

Reference no: EM132957146

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