6. DIVIDEND VALUATION MODEL (2) The Advantage Food Corporation paid a dividend of $1.36 last year and its stock is currently selling for $33.60 per share. The company is expected to grow at 7.5% indefinitely. (a) Estimate the firm's cost of retained earnings. ((b) if the firm has to raise capital beyond what was available from retained earnings, what would be its cost of equity from new stock if flotation costs were 12% of money raised?

6. DIVIDEND VALUATION MODEL (2) The Advantage Food Corporation paid a dividend of $1.36 last year and its stock is currently selling for $33.60 per share. The company is expected to grow at 7.5% indefinitely. (a) Estimate the firm's cost of retained earnings. ((b) if the firm has to raise capital beyond what was available from retained earnings, what would be its cost of equity from new stock if flotation costs were 12% of money raised?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 10P

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