Calculate the cost of issuing new equity for a firm, assuming issue costs are 3 percent of

Question:

Calculate the cost of issuing new equity for a firm, assuming issue costs are 3 percent of the share price after taxes; market price per share = $40; current = $2.75; and the constant growth rate in dividends is 5 percent.

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...