Finance Assignment | Professional Writing
May 30th, 2020
7. The cost of new common stock
represent the fees that firms pay to investment bankers to help them issue new common stock.
Sunny Day Manufacturing Company has a current stock price of $33.35 per share, and is expected to pay a per-share dividend of $2.45 at the end of next year.
The company’s earnings’ and dividends’ growth rate are expected to grow at the constant rate of 5.20% into the foreseeable future. If Sunny Day expects to incur flotation costs of 3.750% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new common stock (rounded to two decimal places) should be .
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