What would be cost of new equity

Assignment Help Financial Management
Reference no: EM131524056

Banyan Co.’s common stock currently sells for $44.50 per share. The growth rate is a constant 9.6%, and the company has an expected dividend yield of 6%. The expected long-run dividend payout ratio is 20%, and the expected return on equity (ROE) is 12%. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of new equity? Round your answer to two decimal places. Do not round your intermediate calculations.


Reference no: EM131524056


Write a Review


Financial Management Questions & Answers

  What is heusers after-tax cost of debt

The heuser company's currently outstanding bonds have a 10% coupon and a 12% yield to maturity. Heuser believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is heuser's after-ta..

  Fixed assets is required to support this growth in sales

Thorpe Mfg., Inc., is currently operating at only 86 percent of fixed asset capacity. Current sales are $710,000. Suppose fixed assets are $600,000 and sales are projected to grow to $834,000. How much in new fixed assets is required to support this ..

  What is the bond''s after-tax yield

An investor recently purchased a corporate bond which yields 10.5%. The investor is in the 36% combined federal and state tax bracket. What is the bond's after-tax yield? Corporate bonds issued by Johnson Corporation currently yield 11%. Municipal bo..

  Firm needs to plow back earnings to fuel growth

No dividends will be paid on the stock over the next nine years because the firm needs to plow back earnings to fuel growth. what is the current share price?

  Designs have the cash flows and payoffs

A new company wants to manufacture a product. The President of the company has decided that he must choose between one of two designs to use in making the product. The designs have the following cash flows and payoffs, listed below. Assume zero cost ..

  Determining the current market price of the bonds

1. Fresh Water Inc sold an issue of 17-years $1,000 par value bonds to the public. The bonds have a 8.47 percent coupon rate and pay interest annually. The current market rate of interest on the Fresh Water, Inc bonds is 12.81 percent. What is the..

  What is maximum gain and loss in this covered call position

An investor buys 200 shares of stock selling at $50. The stock now sells for $70 and the investor writes a 70 call for $3.50. What is the maximum gain and loss in this covered call position?

  Evaluate mass transfer coefficient using correlation

Develop a material balance model to predict the mole fraction of naphthalene vapor exiting the tube.-  Based on your model and the data given in the problem statement, estimate kc.

  Use the amount in the money market account for down payment

You intend to purchase a new car upon graduation in two years. It will have a cost of $29,381, including all extra features and sales tax. You just received a $3,000 pre-graduation gift from your rich uncle that you intend to deposit in a money marke..

  Outstanding shares of common stock

Blitz Industries has 10 million outstanding shares of common stock, $150 million in debt, $30 million in excess cash, and the following financial forecast for the next four years. Calculate all necessary free cash flows (FCFs) based on the informatio..

  One-half of portfolio is invested in the risk-free security

Rosamerta owns a stock that has an expected return of 15.53 percent and a beta of 1.61. What is the expected rate of return (in percents) on the market? A $16,000 portfolio is invested in a risk-free security and two stocks. The beta of stock A is 0...

  Tax liability after foreign tax credit

Calculate Elmo Inc.'s U.S. tax liability before foreign tax credit, FTC limitation, and U.S tax liability after foreign tax credit.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd