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What is the firm cost of internal equity

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Question - Costly Corporation is considering using equity financing. Currently, the firm's stock is selling for $29.00 per share. The firm's dividend for next year is expected to be $5.30 with an annual growth rate of 5.0% thereafter indefinitely. If the firm issues new stock, the flotation costs would equal 15.0% of the stock's market value. The firm's marginal tax rate is 40%. What is the firm's cost of internal equity?

a. 23.28%

b. 26.50%

c. 24.19%

d. 27.58%

d. 21.94%

Reference no: EM133035339

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