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What is the firm cost of external equity

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Reference no: EM132934061

Problem 1: Costly Corporation is considering using equity financing. Currently, the firm's stock is selling for $36.00 per share. The firm's dividend for next year is expected to be $4.80 with an annual growth rate of 4.0% thereafter indefinitely. If the firm issues new stock, the flotation costs would equal 10.0% of the stock's market value. The firm's marginal tax rate is 40%. What is the firm's cost of external equity?

Reference no: EM132934061

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