External Equity for Combs Inc
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Combs, Inc. is issuing new common stock at a market price of $22. Dividends last year were $1.15 per share and are expected to grow at a rate of 7%. Flotation costs will be 5% of the market price. What is Combs, Inc.'s cost of external equity? Show calculations.
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Solution Summary
The solution examines external equity for Combs Inc. The flotation costs will be 5% of the market price.
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re = + g
where:
re is the cost of new common stock.
D1 is the dividend to be paid after one year.
P0 is the current ...
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