Five million additional shares of common stock will be issued by Cyber Corporation to fund a new venture. The additional shares will raise the number of outstanding shares to 25 million. Cyber's current required rate of return is 12.6 percent, while its long-term growth rate is 6%. The company just distributed a $1.00 dividend, and the stock is currently trading for $16.06. The company's stock price decreased once the news of the new equity issuance was announced. Cyber predicts that the new project would boost the company's growth rate to 6.5 percent, but because the initiative is riskier than normal, the cost of capital for the company will rise to 13.5 percent. 

What is the change in the equilibrium stock price?

Answer rating: 100% (QA)

To calculate the change in the equilibrium stock price we need to first calcula... View the full answer