Explore BrainMass

Cost of equity

Salte Corporation is issuing new common stock at a market price of $27.
Dividends last year were $1.45 and are expected to grow at an annual rate of 6 percent forever. Flotation costs will be 6 percent of market price. What is Salte's cost of equity?

kncs D^1/Np0= + g
kncs = 1.45(1+0.06)/27(1-0.06)+ 0.06 = .1206 = 12.06%

How do I set this up in Excel?

Solution Summary

The solution explains how to calculate the cost of equity