Author Question: Dickerson Corporation's common stock is currently selling for 38. Last year's dividend was 4.00 per ... (Read 35 times)

abc

  • Hero Member
  • *****
  • Posts: 543
Dickerson Corporation's common stock is currently selling for 38. Last year's dividend was 4.00 per share.
  Investors expect dividends to grow at an annual rate of 7 percent indefinitely.
 
  Flotation costs of 4 will be
  incurred when new stock is sold.
  a. What is the cost of internal common equity?
  b. What is the cost of new common equity?

Question 2

Kinard's Kennels Inc ROE is 20. Their dividend payout ratio is 70. The last dividend, just paid,
  was 2.00.
 
  If dividends are expected to grow by the company's internal growth rate indefinitely,
  what is the current value of Kinard's common stock if its required return is 18?
  A) 14.92 B) 17.67 C) 16.89 D) 11.52


Li Jun

  • Sr. Member
  • ****
  • Posts: 335
Answer to Question 1

a. D1 = 4.00  1.07 = 4.28
Cost of internal common equity = 4.28/38 + .07 = 18.26
b. Cost of new common equity = 4.28/(38  .

Answer to Question 2

B



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

The newest statin drug, rosuvastatin, has been called a superstatin because it appears to reduce LDL cholesterol to a greater degree than the other approved statin drugs.

Did you know?

According to research, pregnant women tend to eat more if carrying a baby boy. Male fetuses may secrete a chemical that stimulates their mothers to step up her energy intake.

Did you know?

Alcohol acts as a diuretic. Eight ounces of water is needed to metabolize just 1 ounce of alcohol.

Did you know?

There used to be a metric calendar, as well as metric clocks. The metric calendar, or "French Republican Calendar" divided the year into 12 months, but each month was divided into three 10-day weeks. Each day had 10 decimal hours. Each hour had 100 decimal minutes. Due to lack of popularity, the metric clocks and calendars were ended in 1795, three years after they had been first marketed.

Did you know?

The effects of organophosphate poisoning are referred to by using the abbreviations “SLUD” or “SLUDGE,” It stands for: salivation, lacrimation, urination, defecation, GI upset, and emesis.

For a complete list of videos, visit our video library