Question

Barton Industries expects next year's annual dividend,
D_{1}, to be $2.50 and it expects dividends to grow at a
constant rate g = 4.2%. The firm's current common stock price,
P_{0}, is $22.90. If it needs to issue new common stock,
the firm will encounter a 5.9% flotation cost, F. Assume that the
cost of equity calculated without the flotation adjustment is 12%
and the cost of old common equity is 11.5%. What is the flotation
cost adjustment that must be added to its cost of retained
earnings? Round your answer to 2 decimal places. Do not round
intermediate calculations.

%

What is the cost of new common equity considering the estimate made from the three estimation methodologies? Round your answer to 2 decimal places. Do not round intermediate calculations.

Answer #1

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Barton Industries expects next year's annual dividend,
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the firm will encounter a 5% flotation cost, F. Assume that the
cost of equity calculated without the flotation adjustment is 12%
and the cost of old common equity is 11.5%. What is the flotation
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Barton Industries expects next year's annual dividend, D1, to be
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The firm's current common stock price, P0, is $21.90. If it needs
to issue new common stock, the firm will encounter a 4.9% flotation
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cost, F. What is the flotation cost adjustment that must be added
to its cost of retained earnings? Do not round intermediate
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Quantitative Problem: Barton Industries expects
next year's annual dividend, D1, to be $1.70 and it expects
dividends to grow at a constant rate g = 4%. The firm's current
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stock, the firm will encounter a 4.1% flotation cost, F. Assume
that the cost of equity calculated without the flotation adjustment
is 12% and the cost of old common equity is 11.5%. What is the
flotation cost adjustment...

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next year's annual dividend, D1, to be $1.60 and it expects
dividends to grow at a constant rate g = 4.4%. The firm's current
common stock price, P0, is $22.00. If it needs to issue new common
stock, the firm will encounter a 5.5% flotation cost, F. Assume
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is 12% and the cost of old common equity is 11.5%. What is the
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Quantitative
Problem: Barton Industries expects next year's annual
dividend, D1, to be $1.90 and it expects dividends to
grow at a constant rate g = 4.6%. The firm's current common stock
price, P0, is $22.10. If it needs to issue new common
stock, the firm will encounter a 4.4% flotation cost, F. Assume
that the cost of equity calculated without the flotation adjustment
is 12% and the cost of old common equity is 11.5%. What is the
flotation cost adjustment...

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to issue new common stock, the firm will encounter a 5.5% flotation
cost, F. Assume that the cost of equity calculated without the
flotation adjustment is 12% and the cost of old common equity is
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1a
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D1, to be $2.30 and it expects dividends to grow at a
constant rate g = 4.9%. The firm's current common stock price,
P0, is $25.00. If it needs to issue new common stock,
the firm will encounter a 4.5% flotation cost, F. What is the
flotation cost adjustment that must be added to its cost of
retained earnings? Do not round intermediate calculations. Round
your answer to two decimal places.
_____%...

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