Find the cost of newly issued common stock

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Reference no: EM1355629

Paramount, Inc. just paid a dividend of $2.05 per share, and the firm is expected to experience constant growth of 12.50% over the foreseeable future. The common stock is currently selling for $65.90 per share. Flotation costs on new common stock are expected to be 9.75%, and the firm's marginal tax rate is 40%. Using the Gordon (DCF) Model, what is Paramount's cost of newly issued common stock?
a. 11.80%
b. 22.25%
c. 9.65%
d. 16.38%

Reference no: EM1355629

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