Firm dividends are expected to grow at an annual rate

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Reference no: EM131361278

To raise equity funds, a firm can sell common stock for $50 per share with a 10% flotation cost. The firm paid $2.00 dividend last year. The firm’s dividends are expected to grow at an annual rate of 5%. What is the firm’s cost of equity if it sells new common stock to raise equity funds?

9.2%

9.67%

Reference no: EM131361278

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