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Determine the cost of external equity capital

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Reference no: EM133120822

Question - The following financial information is available on Rawls Manufacturing Company:

Current (t=0) market price of common shares: $48.00

Current (t=0) dividend per share: $3.50

Expected long-term constant dividend growth rate: 5.00%

Rawls can issue new common stock to net the company $44 per share. Determine the cost of external equity capital using the dividend capitalization model approach.

Reference no: EM133120822

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