Cost of equity financing

Business & Finance
Tutor: None Selected Time limit: 1 Day

Calculate the cost of new common equity financing of stock Q using Gordon Model

Round the answers to two decimal places in percentage form.

Last Year Dividend

Growth Rate of Dividends

Selling Price of Stock

Floatation Costs

Cost of Common Equity

Stock Q

$4.89

1%

$35.37

$3.01

?

Sep 23rd, 2015

Thank you for the opportunity to help you with your question!

Cost of common equity = (dividends per share / current market value of stock) + Growth rate of dividends + floatation costs

= ((4.89*101%)/ 35.37) + (4.89*101%) + 3.01

= $8.088

Please let me know if you need any clarification. I'm always happy to answer your questions.
Sep 23rd, 2015

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