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
Productivity is difficult to measure because precise units of measure are available, quality is consistent, and exogenous variab
podryga [215]

Answer:

False

Explanation:

All of the statements being made are False. Productivity is measured by stats. For example, in any given month a certain number of products are produced by a fixed number of employees, the next month the same value is calculated and compared with the previous month. This lets you know if productivity is increasing or decreasing. The quality of anything depends on the time and effort being implemented in making something, if this changes then so does the quality. Exogenous variables are simply variables that are not affected by other variables in a given environment, this does not mean that they cannot change. Even though they are independent they can still change. For example, the weather is an exogenous variable but it can still change from Raining to Sunny.

6 0
3 years ago
Which of the following activities of a finance manager determines the types of assets the firm​ holds? A. analyzing and planning
Vlad [161]

Answer:

Which of the following activities of a finance manager determines the types of assets the firm​ holds?

C. investment decisions

Explanation:

Select the type of assets in which the funds will be invested by the firm is termed as the investment decision

6 0
3 years ago
How Socially Conscious Are You?
Liono4ka [1.6K]
I don’t really understand this question. But i have really bad adhd and whenever i’m in a fast paced conversation i often find it hard to stop myself from over sharing and i tend to miss a lot of social queues :/
4 0
2 years ago
There is a trend in the United States toward rediscovering the flavor of regional cooking and the use of locally grown ingredien
Llana [10]

Answer:

Lifestyles

Explanation:

There are many reasons for this market to grow over the years, for example: Farmers' markets provide low-risk entry points for new or beginning farmers; educational opportunities for the general public; and increased access to fresh food for food-insecure community members.

8 0
3 years ago
Please someone answer this for me. I will give brainliest points
Ket [755]
Your answer would be severity (:
5 0
3 years ago
Other questions:
  • At December 31, Amy Jo's Appliances had account balances in Accounts Receivable of $309,000 and $600 (credit) in Allowance for U
    14·1 answer
  • What is budget variance?
    8·1 answer
  • The assumption that in the absence of contrary information a business entity will continue indefinitely is the:
    8·1 answer
  • Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which
    6·1 answer
  • The career clusters show us that there are A. no more manufacturing jobs. B. few career options. C. few career options in the ar
    10·1 answer
  • Seminole Company began year 2017 with 23,000 units of product in its January 1 inventory costing $15 each. It made successive pu
    12·1 answer
  • Consider a process consisting of three resources. Assume there exists unlimited demand for the product, and that all activities
    12·1 answer
  • Solving for dominant strategies and the Nash equilibrium
    9·1 answer
  • In the forbes article, kotlikoff explains that saving and investing decisions should be guided by?
    5·1 answer
  • Amazon’s home delivery of groceries and instacart’s delivery of whole foods items are found where on the market development curv
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!