Newtron Inc. is going to finance half of the new investment project with retained earnings and the
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Question:
Newtron Inc. is going to finance half of the new investment project with retained earnings and the other half, with a new stock issue. In the current year dividends distributed per face value is 30 %. The company has adopted a policy of distributing 40 % of its profits and using the rest in reinvestment. The average profitability of assets is 22 % and flotation cost pers hare is equal to 0,50 ₺ and the current market price of one share is 15 %. Using the Dividend Discount Model,
a) Compute the cost of retained earnings
b) Compute the cost of newly issued stocks
Related Book For
Business Statistics a decision making approach
ISBN: 978-0133021844
9th edition
Authors: David F. Groebner, Patrick W. Shannon, Phillip C. Fry
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