What would be cost of new equity

Assignment Help Financial Management
Reference no: EM131907293

Banyan Co.’s common stock currently sells for $42.00 per share. The growth rate is a constant 9.6%, and the company has an expected dividend yield of 4%. The expected long-run dividend payout ratio is 20%, and the expected return on equity (ROE) is 12%. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of new equity? Round your answer to two decimal places. Do not round your intermediate calculations.

Reference no: EM131907293

Questions Cloud

Cost of debt can be estimated using cost of bonds : The cost of debt can be estimated using the cost of bonds (the principal component in the company’s debt), which has the following characteristics:
What is estimate of callahan cost of common equity : Using the DCF approach, what is its cost of common equity? what is your estimate of Callahan's cost of common equity?
Statement best represents the digby company : Which mission statement best represents the Digby company?
Wacc and cost of common equity : Kahn Inc. has a target capital structure of 55% common equity and 45% debt to fund its $9 billion in operating assets.
What would be cost of new equity : New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of new equity?
What is its cost of common equity and WACC : The last dividend was D0 = $4.00, and it is expected to grow at a 5% constant rate. What is its cost of common equity and its WACC?
What is evanec cost of retained earnings : What is Evanec's cost of retained earnings, rs? What is Evanec's cost of new common stock, re?
What is the project payback and the project MIRR : Project L costs $45,000, its expected cash inflows are $11,000 per year for 6 years, What is the project's payback? What is the project's MIRR?
Calculate the NPV and IRR with mitigation : Calculate the NPV and IRR with mitigation. Calculate the NPV and IRR without mitigation.

Reviews

Write a Review

Financial Management Questions & Answers

  Estimate the net incremental cash flows

Johnsons chemical is considering an investment project. the project requires an initial outlay of $3million for equipment and machinery. sales are projected to be $1.5million per year for the next four years. the equipment will be fully depreciated s..

  Discount rate on particular money market instrument

The annualized discount rate on a particular money market instrument is 3.75%. The face value is $200,000, and it matures in 51 days. What is its price? What would be the price if it had 71 days to maturity? Show work for best comprehension.

  Maximum amount anyone should pay to purchase share

Phillips 66 announced that the next annual dividend will be $1.75 a share, and that all dividends after that will decrease by 1.5 percent annually. What is the maximum amount anyone should pay to purchase a share of this stock today if one requires a..

  In discussions with its investment bank

DiPitro’s Paint and Wallpaper, Inc., needs to raise $1.17 million to finance plant expansion. In discussions with its investment bank,

  Describe key components of the international monetary system

Describe the key components of the International Monetary System and give two specific real-world examples that illustrate each component.

  No debts return on assets before taxes

assume that No debts return on assets before taxes will continue to be 20% forever i.e, that it faces zero risk. Should it borrow at the given rate?

  What is her portfolio beta

If these are the only two investments in her portfolio, what is her portfolio's beta?

  Sales using regression to estimate a trend

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using regression to estimate a trend?

  Estimate current cost of capital

Estimate the current cost of capital.

  What is the expected rate of dividend growth

Analysts expect that H.O.T. Ltd will report earnings of $300 million one year from today. H.O.T.’s policy is to pay 75% of its earnings out in dividends (it paid its dividends already for this year). The company has 60,000,000 shares outstanding and ..

  What was the average nominal risk premium on stock

You’ve observed the following returns on Barnett Corporation’s stock over the past five years: –26.7 percent, 14.8 percent, 32.6 percent, 2.9 percent, and 21.9 percent. The average inflation rate over this period was 3.29 percent and the average T-bi..

  Credit standards to increase its currently sagging sales

Relaxation of credit standards. Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging sales.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd