1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Mashcka [7]
3 years ago
13

Builtrite’s common stock is currently selling for $48 a share and the firm just paid an annual dividend of $2.80 per share. Mana

gement believes that dividends and earnings should grow at 8% annually. Since new stock would need to be sold to finance an expansion, Builtrite expects flotation costs to be 5% of the expected selling price of $48 a share. Based on this, and a marginal tax rate of 34%, what is the cost of new common stock?
Business
1 answer:
Misha Larkins [42]3 years ago
4 0

Answer:

So the cost of new stock will be 14.63 %

Explanation:

We have given dividend for next year = $2.80

Stock price = $48

Flotation rate = 5 %

Growth rate = 8 %

We have to find the cost of new common stock

We know that cost of new common stock is given by

Cost of new stock =\frac{dividend\ for\ next\ year}{stock\ price(1-flotation\ rate)}+growth\ rate

= =\frac{2.8\times (1+0.08)}{48\times (1-0.05)}+0.08=0.1463=14.63%

So the cost of new stock will be 14.63 %

You might be interested in
Managers should consider the price sensitivity of the target market when setting prices.
UkoKoshka [18]

True. Managers should consider the price sensitivity of the target market when setting prices.

<h3>What is meant by price sensitivity?</h3>

The degree to which demand fluctuates as a product's or service's price changes is known as price sensitivity. The price elasticity of demand, which implies that certain buyers won't pay more if a lower-priced choice is available, is a typical method for measuring price sensitivity.

By dividing the percentage change in quantity demanded by the percentage change in price, one can calculate price sensitivity. Sensitivity in finance refers to how much a market instrument will change in response to changes in underlying factors, most frequently in terms of how its price will move in response to other circumstances.

Read more on price sensitivity here: brainly.com/question/11715656

#SPJ1

Managers should consider the price sensitivity of the target market when setting prices.

t OR f

4 0
1 year ago
stock y has a beta of 1.5 and an expected return of 16.35. what is the risk free rate if the market return is 12.5%
ratelena [41]

Answer:

the risk free rate of return is 4.8%

Explanation:

The computation of the risk free rate of return is shown below:

As we know that

Expected rate of return = Risk free rate of return + beta × (market rate of return - risk free rate of return)

Here we assume the risk free rate of return be x

So ,

16.35% = x + 1.5 × (12.5% - x)

16.35% =  x + 18.75% - 1.5x

16.35% - 18.75% = -0.5x

x = 4.8%

Hence, the risk free rate of return is 4.8%

5 0
3 years ago
Consider the following statement: “An increase in the cost of oil will cause the price of a plane ticket to increase. This incre
Natali5045456 [20]

Answer:

An increase in the price of a ticket will not cause a decrease in demand, but rather a decrease in quantity demanded.

Explanation:

4 0
3 years ago
Melanie, a white female employed at The Office Corner for three months, is married to Muhammad, who is of Middle Eastern descent
Mice21 [21]
What answers do we have to choose from?
4 0
3 years ago
For a firm that is a price taker in the market for labor, the marginal revenue product of labor equals
Inga [223]

Answer: Option (a) is correct.

Explanation:

Correct option: The marginal product of labor multiplied by the product price.

It represents the additional revenue generated by adding one more unit of labor employed.

Also, we can say that the marginal revenue product of labor equals the value  of the marginal product of labor.

Marginal revenue product of labor is equal to the marginal product of labor times the product price.

5 0
3 years ago
Other questions:
  • Obtain estimates of daily relatives for the number of customers at a restaurant for the evening meal, given the following data.
    5·1 answer
  • A(n) __________ consists of independent firms at different levels of production and distribution joining together through contra
    13·1 answer
  • Marvin’s Kitchen Supply delivers restaurant supplies throughout the city. The firm adds 10 percent to the cost of the supplies t
    11·1 answer
  • Currently, you own 1.2 percent of the outstanding shares of Home Security. The firm has decided to issue additional shares of st
    6·1 answer
  • A stadium has 54 comma 000 seats. Seats sell for ​$25 in Section​ A, ​$20 in Section​ B, and ​$15 in Section C. The number of se
    15·2 answers
  • Which of the following are criteria for determining whether to record an asset as a fixed asset?
    10·1 answer
  • During the current year, Esterhazy, Inc. estimated manufacturing overhead for the year to be $896,000. The company uses direct l
    13·1 answer
  • A portfolio comprises Coke​ (beta of 1.1​) and​ Wal-Mart (beta of 1​). The amount invested in Coke is​ $10,000 and in​ Wal-Mart
    9·1 answer
  • Astrid, a customer service representative with NorthTel Wireless Services, was asked by one of her customers if NorthTel would b
    6·1 answer
  • Stockholders of Marshall Manufacturing are concerned about irregularities in the firm's accounting system. One approach to ident
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!