Author Question: LePage Co. expects to earn $2.90 per share during the current year, its expected payout ratio is ... (Read 13 times)

mt05945 · **on:** Aug 7, 2023

Question 1

Kovach Lumber Company hired you to help estimate its cost of capital. You were provided with the following data: D₁= $1.30; P₀= $28.90; g = 7% (constant); and F = 6%. What is the cost of equity raised by selling new common stock?

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10.41%

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10.80%

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11.21%

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11.79%

Question 2

LePage Co. expects to earn $2.90 per share during the current year, its expected payout ratio is 60%, its expected constant dividend growth rate is 5%, and its common stock currently sells for $24 per share. New stock can be sold to the public at the current price, but a flotation cost of 6% would be incurred. What would be the cost of equity from new common stock?

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11.81%

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12.04%

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12.35%

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12.71%

leilani49 · **Reply #1 on:** Aug 7, 2023

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