What is the flotation cost adjustment

Reference no: EM131943164

Question: Barton Industries expects next year's annual dividend, D1, to be $2.00 and it expects dividends to grow at a constant rate g = 4.1%. The firm's current common stock price, P0, is $20.10. If it needs to issue new common stock, the firm will encounter a 5.5% flotation cost, F. Assume that the cost of equity calculated without the flotation adjustment is 12% and the cost of old common equity is 11.5%.

a) What is the flotation cost adjustment that must be added to its cost of retained earnings? Round your answer to 2 decimal places. Do not round intermediate calculations. %

b) What is the cost of new common equity considering the estimate made from the three estimation methodologies? Round your answer to 2 decimal places. Do not round intermediate calculations.

Reference no: EM131943164

Questions Cloud

Value zero-coupon bond that matures : What interest rete is implicit in a $1,000 par value zero-coupon bond that matures in 6 years if the current price is $580

Calculate the total cost of the seasoned equity : Calculate the total cost of the seasoned equity offering to RPC's existing stockholders as a percentage of the offering proceeds.

Evaluate the cost of new equity using given data : Banyan Co.'s common stock currently sells for $44.50 per share. The growth rate is a constant 9.6%, and the company has an expected dividend yield of 6%.

How much of the total dividend paid by the company : Suppose the Gingridge pays a dividend per share of $3.50. How much of the total dividend paid by the company to Barry will he get to keep?

What is the flotation cost adjustment : What is the flotation cost adjustment that must be added to its cost of retained earnings? Round your answer to 2 decimal places.

What is the cost of new common equity : What is the cost of new common equity considering the estimate made from the three estimation methodologies? Round your answer to 2 decimal places.

Calculate your target savings by the time you retire : Based on about Finance at University of Tulsa you have started to think year retirement planning, You that at a minimum you will need $70.000 per.

What is the firm cost of equity using the given approaches : The firm uses a 3.7% risk premium when arriving at a ballpark estimate of its cost of equity using the bond-yield-plus-risk-premium approach.

What is the amount of commission that bart must pay : As Bart Brownlee approached retirement, he decided the time had come to invest some of his nest egg in a conservative fund. He chose the Franklin Utilities.

User Account

All Pages