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What is the required rate of return in the new issue

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Reference no: EM132939171

Problem 1: A firm wishes to issue new shares of its stock, which already trades in the market. The current stock price is $20, the most recent dividend was $3 per share, and the dividend is expected to grow at a rate of 3% forever. Flotation costs for this issue are expected to be 10%. What is the required rate of return (or financing cost) in this new issue?

Reference no: EM132939171

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