Question

the common sotkc of Ubees is currently sold at $26.35 per share, and it just a divident of $1.00 last year. The flotation costs on issuing new stock is estimated to be 9% of the market price. The dividents and earnungs are projected to grow at 7% annually. what is Ubees's cost of internal common equity? g

Answer 1

Answer:

11.06%

Explanation:

Cost of equity = (D1/Current price) + Growth rate

Cost of equity = [(1.00*1.07)/26.35] + 0.07

Cost of equity = 0.04061 + 0.07

Cost of equity = 0.11061

Cost of equity = 11.06%

So, Ubees's cost of internal common equity is 11.06%.