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Issuing new shares of common stock src

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The common stock of Stale Research Corp (SRC). is currently selling at a price of $40 per share. SRC is expected to pay an annual $1.80 dividend to its common shareholders one year from today, and these dividends are expected to grow at a constant rate of 8 percent per year indefinitely. Assume SRC would incur flotation costs of 10% when issuing new shares of common stock SRC faces a marginal tax rate of 21%. What is the cost of equity for Serenity assuming it issues new shares of equity?

Reference no: EM131968848

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