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
Pepsi [2]
3 years ago
5

Costly Corporation is considering using equity financing. Currently, the firm's stock is selling for $31.00 per share. The firm'

s dividend for next year is expected to be $5.30 with an annual growth rate of 7.0% thereafter indefinitely. If the firm issues new stock, the flotation costs would equal 14.0% of the stock's market value. The firm's marginal tax rate is 40%. What is the firm's cost of external equity?
Business
1 answer:
Setler [38]3 years ago
4 0

Answer:

Cost of external equity= 26.9%

Explanation

<em>According to the dividend valuation, the value of a stock is the present value of expected future dividends discounted at the required rate of return.</em>

The model can me modified to determined the cost of equity having flotation cost as follows:

Ke = D(1+r )/P(1-f) + g

Ke= Cost of equity

D- current dividend,

D(1+g) - dividend next year

p- price of stock - 31,00$

f - flotation cost - 14%

g- growth rate - 7%

Ke= 5.30/31× (1-0.14)  +  0.07

 = 0.2687997  × 100

= 26.9%

You might be interested in
Which sentence is​ correct?
cricket20 [7]

D. The school system is composed of five different​ districts, each of which composes six or more schools.

Out of the sentences listed, answer D is the best well written sentence based on structure.  When developing setence structure, makig sure the sentence sounds and is written approriately is necessary.  

6 0
3 years ago
EBay A. is a market because buyers and sellers are brought together to buy and sell. B. cannot function as a market. C. would be
IgorLugansk [536]

Answer:

A. is a market because buyers and sellers are brought together to buy and sell.

Explanation:

The definition of market is that it is a place where sellers of products and services meet with potential buyers. Acording to this definition, Ebay can be considered a market because in this website there are sellers offering different types of products and buyers willing to pay in order to get them.

3 0
3 years ago
As a CEO, Anna is respected by her subordinates because she focuses on future business opportunities, responds quickly to market
Vilka [71]

Answer: Entrepreneurial leadership.

Explanation:

Anna is an Entrepreneurial leader, that is ever ready to take sensible risks and study the market trends to quickly identify changes in the market. An entrepreneurial leader is a leader that is willing to take risks to gain new achievements and is always identifying ways of improving themselves and team they lead.

8 0
3 years ago
Sue and Neal are twins. Sue invests $5,000 at 7 percent when she is 25 years old. Neal invests $5,000 at 7 percent when he is 30
dolphi86 [110]

Answer:

Sue will have more money than Neal as long as they retire at the same time

Explanation:

Both Neal and Sue invest the same amount ($5,000) at same interest rate (7%). In the compound interest rate formula only the time is differ. When they retire at age 60, Sue has 5 years more than Neal meaning Sue earn more interest than Neal.

3 0
3 years ago
The Gregor family installed a pool in their backyard but refused to put in a fence. While the Gregors were on vacation, a 10-yea
d1i1m1o1n [39]

The family of the boy will most likely sue the Gregors for not putting a fence around the pool in their backyard due to which their child has been injured.

<h3>What is a fence?</h3>

A fence is a structure built outside an area to cover it so that no one can escape or enter that area. It is a kind of a railing or a barrier usually made up of wood, wire, or steel bars.

If the Gregor family has put the fence around the pool in their backyard, then a ten-year-old boy can't able to enter the pool area which ultimately results in no injury to the boy. But the Gregor family has denied putting the fence which makes the ten-year-old injured when he jumps into the pool area.

Therefore, the injured boy's family will sue the Gregor family for not putting a fence around the pool area.

To learn more about the Gregor family in the mentioned link:

brainly.com/question/10680266

#SPJ1

8 0
2 years ago
Other questions:
  • You purchased 200 shares of ABC common stock on margin at $50 per share. Assume the initial margin is 50% and the maintenance ma
    10·1 answer
  • Internal Rate of Return Richins Company produces automobile engine parts. The company is examining the possibility of investing
    7·1 answer
  • You are faced with a dilemma. You want very much to go to the park with your friends and hang out. However, your mother left you
    7·1 answer
  • Researcher wants to conduct a secondary analysis using a centers for disease control and prevention (cdc) database that was coll
    5·2 answers
  • Look at the picture, which one is the correct answer?
    8·1 answer
  • Which of the following statements about the consideration set is false? Group of answer choices
    6·1 answer
  • Nevada company paid to the state $1,800 in sales tax that it had previously collected from customers. what type of transaction w
    11·1 answer
  • Preparing a Budgeted Income Statement Oliver Company provided the following information for the coming year: Units produced and
    7·1 answer
  • In February, X City ordered $550,000 of supplies. On March 17th it received all of the ordered supplies and an invoice of $551,0
    8·1 answer
  • Suppose the government in this economy decides to decrease government purchases by $300 billion. The decrease in government purc
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!