Banyan Co.’s common stock currently sells for $42.75 per share. The growth rate is a constant 4%, and the company has an expected dividend yield of 6%. The expected long-run dividend payout ratio is 50%, and the expected return on equity (ROE) is 8.0%. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would be the cost of new equity? Do not round intermediate calculations. Round your answer to two decimal places.
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eBook Problem Walk-Through
Banyan Co.’s common stock currently sells for $42.75 per share. The growth rate is a constant 4%, and the company has an expected dividend yield of 6%. The expected long-run dividend payout ratio is 50%, and the expected
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- eBook Problem Walk-Through Banyan Co.'s common stock currently sells for $57.75 per share. The growth rate is a constant 4%, and the company has an expected dividend yield of 5%. The expected long-run dividend payout ratio is 50%, and the expected return on equity (ROE) is 8.0%. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would be the cost of new equity? Do not round intermediate calculations. Round your answer to two decimal places. %Cost of common equity with flotation Ballack Co.’s common stock currently sells for $46.75 per share. The growth rate is a constant 12 percent, and the company has an expected dividend yield of 5 percent. The expected long-run dividend payout ratio is 25 percent, and the expected return on equity (ROE) is 16 percent. New stock can be sold to the public at the current price, but a flotation cost of 5 percent would be incurred. What would the cost of new equity be?Give typing answer with explanation and conclusion Banyan Co.’s common stock currently sells for $56.75 per share. The growth rate is a constant 7%, and the company has an expected dividend yield of 2%. The expected long-run dividend payout ratio is 30%, and the expected return on equity (ROE) is 10.0%. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would be the cost of new equity? Do not round intermediate calculations. Round your answer to two decimal places.
- COST OF COMMON QUITY The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 6% per year. Callahan’s common stock currently sells for $22.00 per share, its last dividend was $2.00, and it will pay a $2.12 dividend at the end of the current year. 1. Using the CDF approach, what is its cost of common equity? 2. What is youe estimate of Callahan's cost of common equityQuantitative Problem: Barton Industries expects next year's annual dividend, D1, to be $1.70 and it expects dividends to grow at a constant rate gL = 5%. The firm's current common stock price, P0, is $23.60. If it needs to issue new common stock, the firm will encounter a 5.7% 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? Round your answer to 2 decimal places. Do not round intermediate calculations. %eBook Holtzman Clothiers's stock currently sells for $25.00 a share. It just paid a dividend of $2.25 a share (i.e., De- $2.25). The dividend is expected to grow at a constant rate of 4% a year. What stock price is expected 1 year from now? Round your answer to the nearest cent. 1 What is the required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. Grade it Now Save & Continue antinue without saving
- Quantitative Problem: Barton Industries expects next year's annual dividend, D1, to be $2.00 and it expects dividends to grow at a constant rate g = 4.9%. The firm's current common stock price, P0, is $23.50. If it needs to issue new common stock, the firm will encounter a 4.9% 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? Do not round intermediate calculations. Round your answer to two decimal places. % What is the cost of new common equity considering the estimate made from the three estimation methodologies? Do not round intermediate calculations. Round your answer to two decimal places. %Quantitative Problem: Barton Industries expects next year's annual dividend, D1, to be $2.50 and it expects dividends to grow at a constant rate g = 4.9%. The firm's current common stock price, PO, is $20.00. If it needs to issue new common stock, the firm will encounter a 5.3% 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. % What is the cost of new common equity considering the estimate made from the three estimation methodologies? Do not round intermediate calculations. Round your answer to two decimal places.Calculation of gL and EPS Spencer Supplies' stock is currently selling for $60 a share. The firm is expected to earn $5.40 per share this year and to pay a year-end dividend of $1.80. If investors require a 9% return, what rate of growth must be expected for Spencer? Round your answer to the nearest whole number. % If Spencer reinvests earnings in projects with average returns equal to the stock's expected rate of return, then what will be next year's EPS? (Hint: gL = ROE × Retention ratio.) Do not round intermediate calculations. Round your answer to the nearest cent. $
- eBook Banyan Co.'s common stock currently sells for $43.50 per share. The growth rate is a constant 6%, and the company has an expected dividend yield of 6%. The expected long-run dividend payout ratio is 30%, and the expected return on equity (ROE) is 6%. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. Wwhat would be the cost of new equity? Do not round intermediate calculations. Round your answer to two decimal places. %Please show work The stock of Matrix Computing sells for $65, and last year’s dividend was $2.53. Security analysts are projecting that the common dividend will grow at a rate of 9% a year. A flotation cost of 12% would be required to issue new common stock. Matrix’s preferred stock sells for $42.00, pays a dividend of $3.32 per share, and new preferred stock could be sold with a flotation cost of 10%. The firm has outstanding bonds with 25 years to maturity, a 15% annual coupon rate, semiannual payments, $1,000 par value. The bonds are trading at $1,271.59. The tax rate is 20%. The market risk premium is 5.5%, the risk-free rate is 7.0%, and Matrix’s beta is 1.2. In its cost-of-capital calculations, Matrix uses a target capital structure with 40% debt, 10% preferred stock, and 50% common equity. a. Calculate the cost of each capital component—in other words, the after-tax cost of debt, the cost of preferred stock (including flotation costs), and the cost of equity (ignoring…Constant Dividend Growth Valuation Boehm Incorporated is expected to pay a $2.20 per share dividend at the end of this year (i.e., D1 = $2.20). The dividend is expected to grow at a constant rate of 8% a year. The required rate of return on the stock, rs, is 15%. What is the estimated value per share of Boehm's stock? Do not round intermediate calculations. Round your answer to the nearest cent.