A company has just paid a dividend of $2 per share on its common stock (D₀=$2.00). The dividend is expected to grow at a constant rate of 7 percent per year. The stock is currently selling for $42 per share. If the company issues additional shares, it must pay its investment banker a float cost of $1 per share. 

What is the cost of external capital?

Answer rating: 100% (QA)

To determine the cost of external capital we can use the dividend gr... View the full answer