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Murrr4er [49]
3 years ago
15

A firm wishes to issue new shares of its stock, which already trades in the market. The current stock price is $24, the most rec

ent dividend was $3 per share, and the dividend is expected to grow at a rate of 4% forever. Flotation costs for this issue are expected to be 6%. What is the required rate of return (or financing cost) in this new issue?
Business
1 answer:
bekas [8.4K]3 years ago
8 0

Answer:

17.83%

Explanation:

The computation of required rate of return is shown below:-

Required rate of return = ((Expected dividend ÷ (Current Stock price × (1 - Flotation cost as a percentage of issue price)) + Growth rate)) × 100

= ((Dividend × (1 + Growth rate)) ÷ Current Price of stock × (1 - Flotation cost as a percentage of issue price)) + Growth rate))) × 100

= ($3 × (1.04) ÷ $24 × (1 - 0.06) + 0.04) × 100

= ($3.12 ÷ $22.56 + 0.04) × 100

= (0.138297872  + 0.04) × 100

= 17.82978723

or

= 17.83%

Therefore we have applied the above formula.

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Answer:

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2. FASB ASC 260-10-50-1

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2 years ago
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It should be noted that Jessie is into a Distribution business when she sells souvenirs and craft items to tourists in Myrtle Beach, South Carolina.

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7 0
2 years ago
Mary offers to buy Hal's desktop computer for $400. Hal sends Mary an e-mail of acceptance. The $400 is to be paid upon Hal's de
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Answer:

A. This is a bilateral, valid, executory contract

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7 0
3 years ago
Joey set up a lawn-mowing business in his neighborhood. He currently has 7 customers that want their lawns mowed each week, for
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Joey's weekly revenue is $175.

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3 years ago
Shona is buying a rug for her room. Store A has the rug for $45 with a 10% discount. Store B has the same rug for $46 and is off
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Store A= 45 x .10 = 4.5 45 - 4.5 = 40.5 40.5 x .06 = 2.43 40.5 + 2.43 = 42.93  nowStore B = 46 - 10 = 36 36 x .06 = 2.16 36 + 2.16 = 38.16so 40-38.6 that will be 1.84so correct option is B hope it helps
7 0
3 years ago
Read 2 more answers
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