A firm owns stock with a market price of $100 per share and expected dividends of $5.61 per share by the end of next year. A new stock is expected to sell for $98, and $2 per share represents the low price required in the competitive equity market. IPO costs are expected to total $1 per share. Dividends paid on outstanding stocks in the last five years are as follows:

year dividend

1 $ 4.00

2 4.28

3 4.58

4 4.90

5 5.24

calculate The cost of this new issue of common stock

Answer rating: 100% (QA)

To calculate the cost of the new issue of common stock we can use the dividend discount model which ... View the full answer