What is the cost of share capital to the business

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Problem 1: What is an advantage to a small business in listing on the stock exchange?

a) Increasing the competitive information that will be made available to it.
b) Being taken over by a larger business during a period of low sales and profits.
c) Immediate increase in Net Income from inflow of cash by selling common shares.
d) Raise of company's profile and thus improving its chances in attracting better strategic partnerships and financing opportunities.

Problem 2: Manchester Mechanical Ltd. paid a dividend this year of $6.30 on each of its 450,000 common shares outstanding. Current market price is $56.00. Dividends are expected to grow by 1.5% per year. What is the cost of share capital to the business?

a) 11.3%
b) 11.4%
c) 12.8%
d) $2.88 million

Reference no: EM132736938

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