Banyan Co.’s common stock currently sells for $46.75 per share. The growth rate is a constant 6%, and the company has an expected dividend yield of 2%. The expected long-run dividend payout ratio is 25%, and the expected return on equity (ROE) is 8%. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of new equity? Do not round intermediate calculations. Round your answer to two decimal places.
Banyan Co.’s common stock currently sells for $46.75 per share. The growth rate is a constant 6%, and the company has an expected dividend yield of 2%. The expected long-run dividend payout ratio is 25%, and the expected return on equity (ROE) is 8%. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of new equity? Do not round intermediate calculations. Round your answer to two decimal places.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Banyan Co.’s common stock currently sells for $46.75 per share. The growth rate is a constant 6%, and the company has an expected dividend yield of 2%. The expected long-run dividend payout ratio is 25%, and the expected
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