(SOLVED) Assume that Combone Limited's next annual dividend will be 2.40 per share. Its current stock price is 32= per share and growth rate of earnings and dividends is 6.5%.

Discipline: Finance

Type of Paper: Question-Answer

Academic Level: Undergrad. (yrs 1-2)

Paper Format: APA

Pages: 1 Words: 51

Question

• Assume that Combone Limited's next annual dividend will be 2.40 per share. Its current stock price is 32= per share and growth rate of earnings and dividends is 6.5%. The floatation costs are 15% of the market price


• Required 

• Compute the cost of

I. Retained earnings

II. New Common equity


Expert Solution Preview


ii) Cost of new common stock


= 14%

= (2.40 / 32) + 0.065


i) Cost of retained earnings = ......