Estimate made from the three estimation methodologies

Assignment Help Financial Management
Reference no: EM131520401

Quantitative Problem: Barton Industries expects next year's annual dividend, D1, to be $2.30 and it expects dividends to grow at a constant rate g = 4.3%. The firm's current common stock price, P0, is $24.80. If it needs to issue new common stock, the firm will encounter a 4.6% flotation cost, F. Assume that the cost of equity calculated without the flotation adjustment is 12% and the cost of old common equity is 11.5%. What is the flotation cost adjustment that must be added to its cost of retained earnings? Round your answer to 2 decimal places. Do not round intermediate calculations. %

What is the cost of new common equity considering the estimate made from the three estimation methodologies? Round your answer to 2 decimal places. Do not round intermediate calculations.

%

Reference no: EM131520401

Questions Cloud

Classified as three-year macrs property for tax purposes : he device will be used in a five-year project but is classified as three-year MACRS (MACRS Table) property for tax purposes.
Effective interest method for amortizing bond discounts : Nevada uses the effective interest method for amortizing bond discounts and premiums.
What is the firms after-tax cost of debt : If the firm's marginal tax rate is 40%, what is the firm's after-tax cost of debt?
How many years is it until the bond matures : The bond pays interest semi-annually. How many years is it until the bond matures?
Estimate made from the three estimation methodologies : What is the cost of new common equity considering the estimate made from the three estimation methodologies?
What is value of this stock if constant annual growth rate : What is the value of this stock if a constant annual growth rate of 4% is expected in dividends and earnings?
What is your best estimate of the firms cost of equity : What is your best estimate of the firm's cost of equity?
What is mexican currency v. us dollar exchange rate trend : What is Mexican currency v. U.S. dollar exchange rate trend, post-Trump?
What is internal rate of return : You buy a new piece of equipment for $28,192, and you receive a cash inflow of $4,500 per year for 16 years. What is the internal rate of return?

Reviews

Write a Review

Financial Management Questions & Answers

  What will be annual payment if you sign this mortgage

A house you are looking to purchase costs $200,000. You have $29,000 in cash that you can use as a down payment on the house, but you need to borrow the rest of the purchase price. The bank is offering a 30-year mortgage that requries annual payments..

  Business risk beta of plagisoftware using hamada model

End User products Inc. is evaluating a project involving a speicalized software. It has established, after a careful study of the software industry, that PlagiSoftware could be used as a "Pure Play" to evaluate the project. What is the levered beta o..

  Regarding money purchase plans

All of the following are true regarding money purchase plans, except

  Considering a project with the cash flows

Southeast Compositions, Inc. is considering a project with the following cash flows: Compute the net present value of this project if the company's discount rate is 14%. Sentry Manufacturing paid a dividend yesterday of $5 per share. The dividend is ..

  Calculate cash flow for jelly fences

What was the profit for the year and the operating cash flows for Outback Fences if the tax rate is 30%?- Calculate Cash-flow for Jelly Fences for the year 2016.

  Explain the consolidated ?nancial statements of bgi

Describe the various circumstances under which May & Marty could take responsibility for the work of Dey & Dee and make no reference to Dey & Dee's examination of BGI-Western in its own report on the consolidated ?nancial statements of BGI.

  Job with an unusual bonus structure

You have been offered a job with an unusual bonus structure. As long as you stay with the firm, you will get extra 70, 000 every seven years, starting seven years from now. What is the present value of this incentive if you plan to work for the compa..

  What is dollar amount of cash flows that baxter will receive

Baxter plans to hedge its cash flows with a forward contract. What is the dollar amount of cash flows that Baxter will receive in five years if it accepts this project?

  How do you graph a market beta

How do you graph a "market beta"? - What should be on the x-axis, and what should be on the y-axis? - What is an individual data point?

  About the beta of assets

Katy's Kitten Emporium (KKE) is a thriving pet store business. You would like to understand the market risk of the KKE and are looking to find its Beta of the Assets. KKE's Beta of Equity is 1.7, the beta of debt is 0.2, and the tax rate is 29%. If K..

  Make to pay off the loan

If you borrow $25,000 today and your annual payments are $1683.95, how many payments must you make to pay off the loan if you are being charged 6% APR compounded annually?

  Shares of stock outstanding-what is target stock price

Fly Away, Inc., has balance sheet equity of $6.6 million. At the same time, the income statement shows net income of $798,600. The company paid dividends of $403,293 and has 100,000 shares of stock outstanding. If the benchmark PE ratio is 30, what i..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd