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    Cost of newly issued stock

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    Roto Roofing Corp. just paid a dividend of $1.85. This dividend is expected to grow at a constant annual ratae of 3% per year. Roto Roofing's common stock is currently selling for $12.50. The firm can sell new stock at this price subject to floatation costs of 15%. What will the cost of the newly issued stock be?

    a. 17.8%
    b. 16.2%
    c. 18.5%
    d. 19.7%
    e. 20.9%

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    https://brainmass.com/business/accounting-for-corporations/cost-of-newly-issued-stock-158958

    Solution Summary

    This post explains how to calculate the cost of newly issued stock if current price f the common stock; floatation cost, dividend and dividend growth rate is given.

    $2.19