SASCO company is currently trading its common stocks at $120 per share. They expect issuing new shares will require them to sell the new share at a discount of $5 and the cost associated with issuing new shares is expected to be $4 per share. If the expected dividend next year is $20 and the expected growth rate for this company is 8%, what is their cost of new common stock?

SASCO company is currently trading its common stocks at $120 per share. They expect issuing new shares will require them to sell the new share at a discount of $5 and the cost associated with issuing new shares is expected to be $4 per share. If the expected dividend next year is $20 and the expected growth rate for this company is 8%, what is their cost of new common stock?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter9: The Cost Of Capital

Section: Chapter Questions

Problem 5P

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