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Pani-rosa [81]
3 years ago
8

You are a finance intern at Chambers and Sons and they have asked you to help estimate the company's cost of common equity. You

obtained the following data: D1 = $1.25; P0 = $27.50; gL = 5.00% (constant); and F = 6.00%. What is the cost of equity raised by selling new common stock?
Business
1 answer:
koban [17]3 years ago
4 0

D1 = $ 1.25

P0 = $ 27.50

g = 5 % = 0.05

F = 6 % = 0.06

Cost of equity, re = D1/ {P0 x (1- F)} + g

                             = $ 1.25 / {$ 27.50 x (1- 0.06)} + 0.05

                             = $ 1.25 / ($ 27.50 x 0.94) + 0.05

                             = $ 1.25 / 25.85 + 0.05

                           = 0.048356 + 0.05

                           = 0.098356 or 9.84 %

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Answer:

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The computation of the amount reported as a additional paid-in capital  is shown below

For Jan 1, 8 million ×  $15              $120 million

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A company is undergoing a restructuring, and its free cash flows are expected to vary considerably during the next few years. Ho
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Answer:

Value of company = $982.16

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Value of company )year 4= 85/(0.12-0.065) = 1,545.45

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No entry is required on the company's books.

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vlabodo [156]

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