Explore BrainMass

Explore BrainMass

    Cost of newly issued stock

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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%

    © BrainMass Inc. brainmass.com March 4, 2021, 8:18 pm ad1c9bdddf

    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.