Banyan Co.’s common stock currently sells for $41.25 per share. The growth rate is a constant...

Banyan Co.’s common stock currently sells for $41.25 per share. The growth rate is a constant 8.4%, and the company has an expected dividend yield of 4%. The expected long-run dividend payout ratio is 40%, and the expected return on equity (ROE) is 14%. New stock can be sold to the public at the current price, but a flotation cost of 15% would be incurred. What would be the cost of new equity? Round your answer to two decimal places. Do not round your intermediate calculations.

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Banyan Co.’s common stock currently sells for $48.25 per share. The growth rate is a constant...

Banyan Co.’s common stock currently sells for $48.25 per share. The growth rate is a constant 4%, and the company has an expected dividend yield of 4%. The expected long-run dividend payout ratio is 35%, and the expected return on equity (ROE) is 7%. New stock can be sold to the public at the current price, but a flotation cost of 15% would be incurred. What would be the cost of new equity? Do not round intermediate calculations. Round your...

Banyan Co.’s common stock currently sells for $40.25 per share. The growth rate is a constant...

Banyan Co.’s common stock currently sells for $40.25 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...

Banyan Co.’s common stock currently sells for $44.75 per share. The growth rate is a constant...

Banyan Co.’s common stock currently sells for $44.75 per share. The growth rate is a constant 8%, 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 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...

Banyan Co.’s common stock currently sells for $30.25 per share. The growth rate is a constant...

Banyan Co.’s common stock currently sells for $30.25 per share. The growth rate is a constant 5%, and the company has an expected dividend yield of 4%. The expected long-run dividend payout ratio is 50%, 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...

Banyan Co.’s common stock currently sells for $40.75 per share. The growth rate is a constant...

Banyan Co.’s common stock currently sells for $40.75 per share. The growth rate is a constant 6%, and the company has an expected dividend yield of 3%. The expected long-run dividend payout ratio is 40%, 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 15% would be incurred. What would be the cost of new equity?

Banyan Co.’s common stock currently sells for $46.25 per share. The growth rate is a constant...

Banyan Co.’s common stock currently sells for $46.25 per share. The growth rate is a constant 8%, and the company has an expected dividend yield of 5%. The expected long-run dividend payout ratio is 20%, 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 5% would be incurred. What would be the cost of new equity? Do not round intermediate calculations. Round your...

Constant Growth Valuation Woidtke Manufacturing's stock currently sells for $32 a share. The stock just paid...

Constant Growth Valuation Woidtke Manufacturing's stock currently sells for $32 a share. The stock just paid a dividend of $3.75 a share (i.e., D0 = $3.75), and the dividend is expected to grow forever at a constant rate of 8% a year. What stock price is expected 1 year from now? Round your answer to the nearest cent. $ What is the estimated required rate of return on Woidtke's stock? Do not round intermediate calculations. Round the answer to three...

Common stock value—Constant growth McCracken Roofing, Inc., common stock paid a dividend of $1.41 per share...

Common stock value—Constant growth McCracken Roofing, Inc., common stock paid a dividend of $1.41 per share last year. The company expects earnings and dividends to grow at a rate of 5% per year for the foreseeable future. a. What required rate of return for this stock would result in a price per share of $28? b. If McCracken expects both earnings and dividends to grow at an annual rate of 11%, what required rate of return would result in a...

Rossdale Co. stock currently sells for $68.91 per share and has a beta of .88. The...

Rossdale Co. stock currently sells for $68.91 per share and has a beta of .88. The market risk premium is 7.10 percent and the risk-free rate is 2.91 percent annually. The company just paid a dividend of $3.57 per share, which it has pledged to increase at an annual rate of 3.25 percent indefinitely. What is your best estimate of the company's cost of equity? Multiple Choice 9.56% 8.08% 8.88% 7.74%

(Common stockholder expected return) Alyward & Bram common stock currently sells for $23.00 per share. The...

(Common stockholder expected return) Alyward & Bram common stock currently sells for $23.00 per share. The company's executives anticipate a constant growth rate of 10.5 percent and an end-of-year dividend of $2.50. a. What is your expected rate of return? b. If you require a return of 17 percent, should you purchase the stock?

Subjects