Brille Corporation is issuing new common stock at a market price of $32. Dividends last year...

Brille Corporation is issuing new common stock at a market price of $32. Dividends last year were $1.20 and are expected to grow at an annual rate of 11 percent forever. Flotation costs will be 8 percent of market price. What is Brille's cost of equity?

Expert Solution

Cost of equity = [D0(1 + g) / (P0(1 - F))] + g

Cost of equity = [$1.20(1 + 0.11) / ($32(1 - 0.08))] + 0.11

Cost of equity = 0.1552 or 15.52%

jeff jeffy answered 2 years ago

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