1. An issue of common stock is selling for $57.20. The year end dividend is expected to...

Question:

1. An issue of common stock is selling for $57.20. The year end dividend is expected to be $2.32 assuming a constant growth rate of 6%. What is the required rate of return?

A) 10.3%

B) 10.1%

C) 4.1%

D) None of the above

2. Expected cash dividends are $2.50, the dividend yield is 6%, flotation costs are 4%, and the growth rate is 3%. Compute cost of new common stock.

A) 9.00%

B) 9.25%

C) 9.18%

D) 9.44%

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...