Description of this paper

Loading

The management of the SummerIsAlmostHere Company needs to-(Answered)

Description

Instant Solution ? Click "Buy button" to Download the solution File


Question

The management of the SummerIsAlmostHere Company needs to estimate the cost of its equity financing. The latest financial data is as follows: stock price of $25.00; next expected dividend is $1.25 per share; constant expected growth rate in dividends and earnings of 5%; beta of the stock is 1.2; current market rate is 9%; risk-free rate of return is 3%.

a) (6 pts) all the above information, what is a good estimate of the cost of equity? SHOW ALL WORK for full credit.

b) (2 pts) If flotation costs of issuing new common stock is 15% of the stock price, what is the cost of new common stock? SHOW ALL WORK for full credit.

 

Paper#9209663 | Written in 27-Jul-2016

Price : $19
SiteLock