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Question
The following financial information is available on Rawls Manufacturing Company:| Current per share market price | $48.00 |
| Current per share dividend | $ 3.50 |
| Current per share earnings | $ 6.00 |
| Beta | 1.1 |
| Expected rate of return on market | 12.0% |
| Risk-free rate | 6.0% |
| Expected long-term growth rate | 5.0% |
Rawls can issue new common stock to net the company $44 per share. Determine the cost of external equity capital using the dividend capitalization model approach. (Compute answer to the nearest 0.1%).
a. 12.7%
b. 14.4%
c. 12.6%
d. 13.4%
Answer
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Related questions
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