Firm X just paid $5/share dividend. We expect the dividend to grow annually at a constant rate 3%. The current stock price is

Question

3 years ago

5

Firm X just paid $5/share dividend. We expect the dividend to grow annually at a constant rate 3%. The current stock price is

$100. If firm X issues new equity, the new shares would sell at $98/share and the firm also needs to pay investment banks $3/share flotation cost. What is the cost of retained earnings? g

Business

1 answer:

mariarad [96] · Answer 1 · 2022-05-24T22:54:18+03:00

mariarad [96]3 years ago

4 0

Answer:

Cost of Earnings = (Dividends per share for next year ÷ Current market value of the stock) + Dividend growth rate

= 8.42 %

Explanation:

See Attachment

Firm X just paid​ $5/share dividend. We expect the dividend to grow annually at a constant rate​ 3%. The current stock price is​

Firm X just paid $5/share dividend. We expect the dividend to grow annually at a constant rate 3%. The current stock price is