Finance Assignment | Professional Writing
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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