A bond issue with a face amount of $400,000 bears interest at the rate of 8%. The current market rate of interest is 9%. These b
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Answer
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Explanation
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Answer:
cost of capital of common stock = 13.38 %
Explanation:
given data
common stock sell = $145
fee charge= 5%
face value = $145 per share
dividend = 7%
growth rate = 8%
to find out
Uber cost of capital of common stock
solution
we get here cost of capital of common stock that is express as
cost of capital of common stock = + g ....................1
here D1 is dividend at end year and Po is today price and f is flotation rate and g is growth rate
so we get here
cost of capital of common stock = + 0.08
cost of capital of common stock = 0.133763
cost of capital of common stock = 13.38 %