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Cost of Common Equity with and without Flotation
The Evanec Company's next expected dividend, D1, is $3.60; its growth rate is 5%; and its common stock now sells for $32. New stock (external equity) can be sold to net $30.40 per share.
What is Evanec's cost of retained earnings, rs? Round your answer to two decimal places.
rs = %
What is Evanec's percentage flotation cost, F? Round your answer to two decimal places.
F = %
What is Evanec's cost of new common stock, re? Round your answer to two decimal places.
re = %
Which one of the following best matches the primary goal of financial management?
What coupon rate should the company set on its new bonds if it wants them to sell at par? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
On average, a coupon bond will increase in value as it approaches maturity. A bond with a coupon rate higher than its yield is worth more than its par value. Real interest rates are generally higher than nominal interest rates.
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