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Question
Your company's stock sells for $50 per share, its last dividend (D0) was $2.00, its growth rate is a constant 5 percent, and the company would incur a flotation cost of 15 percent if it sold new common stock. Net income for the coming year is expected to be $500,000, the firm's payout ratio is 60 percent, and its common equity ratio is 30 percent. If the firm has a capital budget of $1,000,000, what component cost of common equity will be built into the WACC for the last dollar of capital the company raises?
a. 9.20%
b. 9.94%
c. 10.50%
d. 11.75%
e. 12.30%
Answer
This answer is hidden. It contains 213 characters.
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