The dividend is expected to grow at constant rate

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Reference no: EM131592232

KayCee Manufacturing Company just paid a dividend of $3.50 per share. The dividend is expected to grow at a constant rate of 10% per year. The price of KayCee's common stock today is $40 per share. If KayCee decides to issue new common stock, flotation costs will equal 10%. Kaycee's marginal tax rate is 35%. Based on the above information, the cost of internal equity is

a.12.76%.

b. 19.63%.

c. 18.75%.

d. 19.72%.

Reference no: EM131592232

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