Calculating Cost of New Common Stock Based on Flotation Expenses
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Question
A company will issue new common stock to finance an expansion. The existing common stock just paid a $1.50 dividend, and dividends are expected to grow at a constant rate 8% indefinitely. The stock sells for $45, and flotation expenses of 5% of the selling price will be incurred on new shares. What is the cost of new common stock?
Summary
This question belongs to finance and discusses about calculating cost of new common stock based on flotation expenses.
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