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Determining Firm's Cost of New Equity

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Your company's stock sells for $50 per share, its last dividend (Do) was $2.00, its growth rate is a constant 5 percent, and the company will incur a floating rate cost of 15 percent if it sells new stock. What is the firm's cost of new equity, ke?

a. 9.20%
b. 9.94%
c. 10.50%
d. 11.75%
e. 12.30%

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This solution assists in determining a firm's cost of new equity.

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